Trnaspo Cases 2

FIRST DIVISION
ASSOCIATION OF INTERNATIONAL G.R. No. 157484

SHIPPING LINES, INC.,
in its own behalf and Present:
in representation of its members,
Petitioner, PUNO, C.J., Chairperson,
CARPIO,
CORONA,
AZCUNA, and
- versus - LEONARDO-DE CASTRO, JJ.
PHILIPPINE PORTS AUTHORITY, Promulgated:

Respondent. March 6, 2008
x-----------------------------------------------------------------------------------------x
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review1[1] of the 20 May 2002 Decision2[2] and 27 February 2003 Resolution3[3] of the Court of Appeals in
CA-G.R. SP No. 68212. The assailed decision set aside the trial court’s issuance of a writ of preliminary injunction in favor of the Association of
International Shipping Lines, Inc. (petitioner). The resolution denied the petitioner’s motion for reconsideration.
The Facts
Before the Court is a petition for review [1] of the 20 May 2002 Decision [2] and 27 February 2003 Resolution [3] of the Court of Appeals
in CA-G.R. SP No. 68212. The assailed decision set aside the trial court’s issuance of a writ of preliminary injunction in favor of the Association of
International Shipping Lines, Inc. (petitioner). The resolution denied the petitioner’s motion for reconsideration.
Created by virtue of Presidential Decree No. 857 (PD 857), [4] the Philippine Ports Authority (PPA) is a government corporation specially charged
with the financing, management, and operations of public ports throughout the Philippines. [5] The PPA has the duty, among others, to (1)
supervise, control, regulate, construct, maintain, operate, and provide facilities or services which are necessary in the ports vested in, or belonging to
it; [6] (2) control, regulate, and supervise pilotage and the conduct of pilots in any Port District; [7] and (3) levy dues, rates, or charges for services
provided by it. [8]
On 21 March 1985, the PPA issued Administrative Order No. 03-85 (AO 03-85), setting forth the rules and regulations governing pilotage
services, the conduct of pilots and pilotage fees in Philippine ports. Section 2 of AO 03-85 lays down the statement of policy on pilotage, to wit:
Statement of Policy on Pilotage – It is hereby declared and recognized that pilotage service plays a vital and complementary role in the efficient
operations of the port and the responsibility to undertake the same is inherently vested in the Authority though it may authorize the discharge of such
responsibility to the Pilotage Association. As such, it shall be incumbent upon the Authority to effectively regulate, supervise and control, in the
public interest, pilotage, the conduct of pilots and the fees for their services. (Emphasis supplied)
Section 23 of the same administrative order states that:
Government Share – Pilotage Service is one of the port services which is inherently vested in the Authority which, by its Charter, it may
render on its own or authorize a Pilots’ Association or firm to undertake the service. When it is rendered by the latter, the government shall, in
consideration of the grant of such privilege and/or the use of port facilities be entitled to a government share out of the gross income realized or
receivable from the rendition of purely pilotage service. Said share shall be determined and implemented simultaneously with the rationalization of
pilotage rates, and shall be remitted by the Association not later than the tenth (10th) day of each month.
In 1995, the PPA issued Administrative Order No. 15-95 (AO 15-95), modifying the above provision in AO 03-85. Section 5.3 of AO 15-
95 reads:
PPA revenue – In consideration of the privilege to render pilotage services and to use port facilities, all Harbor Pilots/Pilots’ Associations
shall remit to the Authority, through the Port Management Office (PMO), a government share of not less than ten (10%) percent of their gross income
derived from purely pilotage service. The 10% government share for billings which have already been realized/collected shall be remitted to the
PMO not later than the tenth (10th) day of the succeeding month. Billings which are still to be collected by the pilots (receivables) shall
subsequently, be subject to 10% government share upon collection and shall also be remitted to the PMO not later than the tenth (10th) day of the
succeeding month. In either case, late payments by the harbor pilots/pilots’ associations shall be subject to interest and penalties as prescribed in PPA
AO No. 08-82.
The above remittance scheme shall be without prejudice to PPA’s right to subsequently impose, if warranted, a direct collection system (on
a per vessel basis) in any pilotage district. (Emphasis supplied)
AO 15-95 proved to be inadequate since there were still late remittances and failure to remit on the part of some pilots associations of the
10% government share. [9] Hence, to prevent the accumulation of accounts receivable accruing from the 10% government share, [10] the PPA issued
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on 24 July 2000 Administrative Order No. 09-2000 (AO 09-2000), mandating the direct collection from the shipowners of the 10% government
share.
Section 5.3 of PPA Administrative Order No. 15-95 is hereby amended to read as follows:
5.3 PPA Revenue – In consideration of the privilege to render pilotage service and to use port facilities, all Harbor Pilots/Pilots’
Associations shall remit to the Authority, through the Port Management Office (PMO), a government share of not less than ten (10%) percent of their
gross income derived from purely pilotage service.
5.3.1 The ten (10%) percent government share from regular pilotage services rendered shall be assessed and directly collected by PPA from
shipping companies/agents on a per vessel basis in accordance with the prescribed pilotage rates specified under Section 5.1 of PPA Administrative
Order No. 15-95. Said 10% government share, together with payments for vessel charges, shall be collected by PPA before issuance of the vessel
Department Clearance.
5.3.2 For income derived by the Pilots’ Associations or its members from other related special pilotage services, the Pilots’ Associations
shall be billed by the PPA and shall pay the 10% government share within fifteen (15) days from receipt of PPA billing. Late payments shall be
subject to interest and penalties prescribed under PPA Administrative Order Nos. 08-82 and 01-91.
5.3.3 For purposes of counterchecking the pilots’ gross income and payments made per vessel, the Pilots’ Association shall furnish PPA
with copies of their billings immediately after they are issued to the shipping companies/agents. [11]
The PPA cited as authority for the issuance of AO 09-2000 Sections 2(f), 6-a(viii), b(xv) and 20 of PD 857, as amended by LOI No. 1005-
A, [12] which provide, thus:
SEC. 2. Declaration of Policies and Objectives – It is hereby declared to be the policy of the State to implement an integrated program for
the planning, development, financing, and operation of Ports or Port Districts for the entire country in accordance with the following objectives:
xxxx
f) To ensure that all income and revenues accruing out of dues, rates, and charges for the use of facilities and services provided by the
Authority are properly collected and accounted for by the Authority, that all such income and revenues will be adequate to defray the cost of
providing the facilities and services (inclusive of operating and maintenance cost, administration and overhead) of the Port Districts, and to ensure
that a reasonable return on the assets employed shall be realized.
SEC. 6. Corporate Powers and Duties --
a) The corporate duties of the Authority shall be:
xxxx
(viii) To control, regulate, and supervise pilotage and the conduct of pilots in any Port District.
xxxx
b) The corporate powers of the Authority shall be as follows:
xxxx
(xv) To do all such other things and to transact all such business directly or indirectly necessary, incidental or conducive to
the attainment of the purposes of the Authority.
SEC. 20. Rates and Charges--
a) The Authority may impose, fix, prescribe, increase or decrease such rates, charges or fees for the use of port premises, works, appliances
or equipment belonging to the Authority and port facilities provided, and for services rendered by the Authority or by any private organization within
a Port District.
xxxx
Petitioner and its respective members opposed the implementation of AO 09-2000. The PPA agreed to suspend temporarily the
implementation of the direct collection system. However, petitioner subsequently received a letter from PPA informing petitioner of the
implementation of AO 09-2000 starting 1 March 2001.
Therefore, on 28 February 2001, petitioner filed with the Regional Trial Court of Manila [13] a petition to nullify Section 5.3 of AO 15-95
and AO 09-2000 with a prayer for the issuance of a temporary restraining order and a writ of preliminary injunction.
On the same date, the trial court issued a temporary restraining order and extended it in an Order dated 2 March 2001.
On 7 March 2001, the Philippine Ship Agents’ Association filed a motion to intervene in the case.
In an Order dated 16 March 2001, [14] the trial court approved the Philippine Ship Agents’ Association’s motion to intervene and granted
petitioner’s application for the issuance of a writ of preliminary injunction. The trial court stated thus:
After a thorough consideration of the arguments of the parties through their respective lawyers, this Court is convinced that there appears
sufficient reasons to justify the issuance of a writ of preliminary injunction. From the pleadings filed by petitioners and intervenors, this Court finds
that grave and irreparable injury will be suffered by petitioners and intervenors should a preliminary injunction not issue.
xxxx
ACCORDINGLY, the application of the petitioners and the intervenors for the issuance of a writ of preliminary injunction is GRANTED,
and respondent Philippine Ports Authority and its agents and/or representatives are hereby restrained and enjoined from implementing and enforcing
the last paragraph of Section 5.3 of Administrative Order No. 15-95 and Administrative Order No. 09-2000. This is conditioned upon the filing by
the petitioners and the intervenors of separate bonds in the amount of P100,000.00 which bond shall be approved by this Court. The injunctive bonds
which petitioners and intervenors in the amount of P100,000.00 which each will post shall be executed in favor of the Philippine Ports Authority and
all damages that the latter may suffer by reason of the injunction if the Court should finally decide that they (petitioners and intervenors) are not
entitled thereto.
SO ORDERED. [15]
The PPA filed a motion for reconsideration, which the trial court denied in an Order dated 8 October 2001.
The PPA filed a petition for certiorari with the Court of Appeals, arguing that the trial court abused its discretion in issuing a writ of
preliminary injunction without stating clearly and distinctly the facts and law on which the order was based. The PPA claimed that the assailed rules
and regulations implementing the direct collection system are valid. Moreover, the enforcement of the questioned administrative orders was already
fait accompli as the collection system had already been implemented as early as 13 August 2000. The PPA further alleged that there was neither
impairment of any contract nor a violation of due process in the issuance of the assailed administrative orders mandating the direct collection system.
The Court of Appeals disposed of the case as follows:
WHEREFORE, the instant petition is given due course. The Order of the court a quo dated March 16, 2001 granting the writ of
preliminary injunction is hereby DISSOLVED and SET ASIDE. This includes the Order dated October 8, 2001, denying the motion for
reconsideration for utter lack of factual and legal basis.
SO ORDERED. [16]
Petitioner filed a motion for reconsideration, which the Court of Appeals denied in a Resolution dated 27 February 2003. [17]
Hence, this petition.
The Ruling of the Court of Appeals
The Court of Appeals set aside the trial court’s issuance of a writ of preliminary injunction, holding that petitioner failed to establish its
right to injunction. The Court of Appeals ruled that it was just and proper for the PPA to issue AO 15-95 and AO 09-2000 as these were devised to
address the problem of the PPA in collecting the 10% government share from the different pilots associations. The Court of Appeals added that the
PPA may issue such administrative regulations as may be necessary to meet changing circumstances surrounding the collection of the 10%
government share.
The Issues
In its Memorandum, [18] petitioner basically challenges the validity of the assailed administrative orders for (1) being ultra vires; (2)
violating the principle of autonomy of contract; and (3) amounting to deprivation of property without due process.
Considering that these issues are essentially questions of law, the Court deems it proper and necessary not only to determine the validity of
the issuance of the writ of preliminary injunction but more importantly the legality of the assailed administrative orders in order to finally and
completely dispose of the instant case.
The Ruling of this Court
The petition has no merit.
On the validity of Section 5.3 of AO 15-95

and AO 09-2000
There is no dispute that the PPA has the power to provide pilotage services. The PPA, however, may authorize pilots associations to
provide pilotage services, which is what the PPA precisely did. The PPA contracted out the provision of pilotage services to various pilots
associations. In consideration of the privilege to render pilotage services and to use port facilities, the different pilots associations are required to
remit to the PPA a government share of at least 10% of the pilots’ (members of the associations) gross income derived from purely pilotage service.
Before the introduction of the direct collection system, the different pilots associations used to remit the 10% government share to the PPA.
With the issuance of AO 09-2000, specifically under Section 5.3.1, “[t]he ten (10%) percent government share from regular pilotage services
rendered shall be assessed and directly collected by the PPA from shipping companies/agents on a per vessel basis.” The shipowners are obliged to
withhold this amount from the fees payable to the pilots for their general services, and remit the withheld amount to the PPA. In other words, the
shipowners will withhold the 10% government share from the fees they have to pay the pilots, which amount will then be collected by the PPA. Is
the PPA empowered to appoint the shipowners as its withholding agent to collect the 10% government share?
The Court holds that the PPA has sufficient authority to constitute the shipowners as withholding agent for the 10% government share.
Under its charter, the PPA has the authority to impose, fix, prescribe, increase or decrease such rates, charges or fees for the use of port facilities, and
for services rendered by the PPA or by any private organization. [19] This power necessarily includes the authority to issue rules and regulations on
the manner of collection of the 10% government share. The power to impose or fix rates or charges is definitely much broader than enforcing a
different manner of collection of the 10% government share.
Moreover, in Section 6(b)(xv) of PD 857, the PPA has the power to do things and to transact business directly or indirectly necessary,
incidental or conducive to the attainment of the purposes of the PPA. One of the PPA’s objectives is the proper collection and accounting of all
income and revenues accruing out of dues, rates, and charges for the use of facilities and services provided by the PPA and the realization of a
reasonable return on the PPA’s assets. Since the assailed administrative orders were issued to prevent the accumulation of accounts receivable
accruing from the 10% government share, the assailed administrative orders are clearly within the PPA’s power to do things necessary to the
attainment of PPA’s objectives. A restrictive and unreasonable interpretation of the PPA’s charter would render the PPA powerless in introducing
reforms on the manner of collecting the government share.
Further, being the government corporation in charged of the operation and maintenance of Philippine ports, including the provision of
pilotage services, the PPA has the power to devise effective ways and means to properly collect and recover the government share. As the Court of
Appeals held, an administrative body’s (such as the PPA) power to issue regulations is not, once exercised, deemed exhausted. On the contrary, this
power may be exercised as often as it becomes necessary to adjust the regulation to the changing circumstances surrounding the subject thereof or the
problem sought to be solved or alleviated by the rule. [20] The PPA admits encountering difficulties in collecting the 10% government share from the
pilots associations, prompting the PPA to implement the direct collection system. The direct collection system, which is essentially the withholding
at source of the government share for remittance to the PPA, is certainly more efficient than the old collection system.
The Court rejects petitioner’s contention that the direct collection system is unreasonable. The direct collection system has a reasonable
relationship [21] to PPA’s objective of ensuring the effective collection and accounting of all income and revenues accruing out of dues, rates, and
charges for the use of facilities and services provided by the PPA, whether on its own or by contract. Nothing shows that the direct collection system
produces burdensome and inequitable results since the shipowners will simply withhold the 10% government share and remit the same together with
the regular vessel charges. Significantly, the direct collection system aims to simplify and integrate the collection of the 10% government share with
the regular vessel fees and charges. Likewise, the 10% government share is easily ascertainable as it shall be in accordance with the prescribed
pilotage rates specified under Section 5.1 of AO 15-95. [22]
There is also no merit in petitioner’s argument that the direct collection system violates the principle of autonomy of contract. [23]
Petitioner insists that since it is not a party to the contract between the PPA and the pilots associations, petitioner can not be required to withhold and
remit the 10% government share to the PPA. It must be emphasized that there is no new party in the contract between the PPA and the pilots
associations regarding the provision of pilotage services and the payment of the government share. The Court agrees with the PPA that the only
difference between the old and new collection system is the manner of collection. Whether under the old or new system of collecting the 10%
government share, the pilots, who are members of the various pilots associations, are the ones legally liable for the payment of the 10% government
share. The PPA merely appointed the shipowners as its withholding agent for the 10% government share. No new fees or charges were imposed upon
the shipowners. What the shipowners will remit to the PPA is actually a portion of the fees they used to pay the pilots under the old collection
system.
Petitioner also points out that it is not objecting to the payment of the pilotage fees. Petitioner is even willing to pay to the PPA the full
pilotage fees if the PPA chose to render pilotage services itself and not through petitioner’s contractors or the pilots associations.
Under Section 6(a)(v) of PD 857, one of the corporate duties of the PPA is to provide services (whether on its own, by contract, or
otherwise) within the Port Districts and the approaches thereof. Paragraph (b)(vi) of the same section empowers the PPA to make or enter into
contracts of any kind or nature to enable it to discharge its functions under PD 857. [24] Clearly, petitioner cannot validly complain and refuse to
comply with the direct collection system simply because the PPA chose to contract out the provision of pilotage services to different pilots
associations.
Petitioner likewise argues that since the 10% government share is based on the actual gross income of the pilots, this amount is demandable
only after the pilots have become entitled to the pilotage fees, and that is when they have performed the service. Since the pilots are not entitled to
the pilotage fees until after completion of the service, it follows that the PPA is not yet entitled to the 10% government share.
Based on Section 5.2 of AO 15-95, the term “gross income” shall be understood to mean as total gross billings (whether already realized or
still to be collected) assessed the shipping agents/vessel owners for the conduct of regular and other related special pilotage services. However, it is
clear from the words of AO 09-2000 that its purpose is “to revise the guidelines by requiring shipping lines/agents to pay directly to PPA the 10%
government share from pilotage service actually rendered (excluding overtime) by Harbor Pilots/Harbor Pilots’ Associations.” Thus, the withholding
of the 10% government share applies only for pilotage services actually rendered.
On petitioner’s assertion that the assailed administrative orders amount to deprivation of property without due process, suffice it to state
that this Court will not rule on constitutional issues if the case can be disposed of on some other grounds. Thus, even if all the requisites for judicial
review of a constitutional matter are present in a case, this Court will not pass upon a constitutional question unless it is the lis mota of the case. [25]
Anyway, petitioner failed to substantiate its claim of deprivation of property without due process. Nothing shows how petitioner was deprived of its
property or which property was taken from petitioner. To repeat, there is no new or additional fee or charges which petitioner has to pay. Even
before the introduction of the direct collection system, petitioner used to pay the 10% government share as part of the fees it pays the pilots.
On the propriety of the issuance

of a writ of preliminary injunction
Petitioner argues that the shipowners will suffer “grave and irreparable injury” because of the non-issuance of departure clearances to
vessels for non-payment of the 10% government share. Petitioner maintains that “the vessels that call to the Philippine ports have a tight schedule to
follow in order to meet their commitments here and abroad. x x x The penalty of non-issuance of vessel’s departure clearance to the shipowners and
ship agents would certainly wreak havoc to their operations.”
Aside from petitioner’s bare allegation of the “grave and irreparable injury” it will suffer, there is nothing in the records which shows the
existence of petitioner’s clear and unmistakable right that must be protected, and an urgent and paramount necessity for the writ to prevent serious
damage.4[26] Therefore, as the Court of Appeals ruled, petitioner is not entitled to the injunction writ.
Moreover, this Court views the non-issuance of a vessel’s departure clearance for non-payment of the 10% government share as an
essential part of a procedure, contrary to petitioner’s claim that it is a harsh penalty. The withholding of the 10% government share for remittance to
the PPA for actual pilotage services rendered is a reasonable condition for the issuance of the vessel’s departure clearance. It is not an additional fee
or charge for which the shipowners are liable.
It is also worthy to note that, as the PPA claims, except for the pilotage district of Manila (North Harbor, Bataan, MICT, and South Harbor),
the direct collection system was implemented by the respective Port Management Offices of the PPA nationwide. The shipping companies, both
foreign and local, as well as shipping agents have already complied with AO 09-2000 as reported by the Port Operations and Services Department.5[27]
WHEREFORE, the Court DENIES the petition. The Court AFFIRMS the 20 May 2002 Decision and 27 February 2003 Resolution of
the Court of Appeals in CA-G.R. SP No. 68212.
SO ORDERED.
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5
FIRST DIVISION
[G.R. No. 154514. July 28, 2005]
WHITE GOLD MARINE SERVICES, INC., petitioner, vs. PIONEER INSURANCE AND SURETY CORPORATION AND THE
STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION (BERMUDA) LTD., respondents.
DECISION
QUISUMBING, J.:
This petition for review assails the Decision[1] dated July 30, 2002 of the Court of Appeals in CA-G.R. SP No. 60144, affirming the Decision[2]
dated May 3, 2000 of the Insurance Commission in I.C. Adm. Case No. RD-277. Both decisions held that there was no violation of the Insurance
Code and the respondents do not need license as insurer and insurance agent/broker.
The facts are undisputed.
White Gold Marine Services, Inc. (White Gold) procured a protection and indemnity coverage for its vessels from The Steamship Mutual
Underwriting Association (Bermuda) Limited (Steamship Mutual) through Pioneer Insurance and Surety Corporation (Pioneer). Subsequently,
White Gold was issued a Certificate of Entry and Acceptance. [3] Pioneer also issued receipts evidencing payments for the coverage. When White
Gold failed to fully pay its accounts, Steamship Mutual refused to renew the coverage.
Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to recover the latter’s unpaid balance. White Gold
on the other hand, filed a complaint before the Insurance Commission claiming that Steamship Mutual violated Sections 186 [4] and 187[5] of the
Insurance Code, while Pioneer violated Sections 299,[6] 300[7] and 301[8] in relation to Sections 302 and 303, thereof.
The Insurance Commission dismissed the complaint. It said that there was no need for Steamship Mutual to secure a license because it was not
engaged in the insurance business. It explained that Steamship Mutual was a Protection and Indemnity Club (P & I Club). Likewise, Pioneer need
not obtain another license as insurance agent and/or a broker for Steamship Mutual because Steamship Mutual was not engaged in the insurance
business. Moreover, Pioneer was already licensed, hence, a separate license solely as agent/broker of Steamship Mutual was already superfluous.
The Court of Appeals affirmed the decision of the Insurance Commissioner. In its decision, the appellate court distinguished between P & I
Clubs vis-à-vis conventional insurance. The appellate court also held that Pioneer merely acted as a collection agent of Steamship Mutual.
In this petition, petitioner assigns the following errors allegedly committed by the appellate court,
FIRST ASSIGNMENT OF ERROR
THE COURT A QUO ERRED WHEN IT RULED THAT RESPONDENT STEAMSHIP IS NOT DOING BUSINESS IN THE PHILIPPINES ON
THE GROUND THAT IT COURSED . . . ITS TRANSACTIONS THROUGH ITS AGENT AND/OR BROKER HENCE AS AN INSURER IT
NEED NOT SECURE A LICENSE TO ENGAGE IN INSURANCE BUSINESS IN THE PHILIPPINES.
SECOND ASSIGNMENT OF ERROR
THE COURT A QUO ERRED WHEN IT RULED THAT THE RECORD IS BEREFT OF ANY EVIDENCE THAT RESPONDENT
STEAMSHIP IS ENGAGED IN INSURANCE BUSINESS.
THIRD ASSIGNMENT OF ERROR
THE COURT A QUO ERRED WHEN IT RULED, THAT RESPONDENT PIONEER NEED NOT SECURE A LICENSE WHEN CONDUCTING
ITS AFFAIR AS AN AGENT/BROKER OF RESPONDENT STEAMSHIP.
FOURTH ASSIGNMENT OF ERROR
THE COURT A QUO ERRED IN NOT REVOKING THE LICENSE OF RESPONDENT PIONEER AND [IN NOT REMOVING] THE
OFFICERS AND DIRECTORS OF RESPONDENT PIONEER.[9]
Simply, the basic issues before us are (1) Is Steamship Mutual, a P & I Club, engaged in the insurance business in the Philippines? (2) Does
Pioneer need a license as an insurance agent/broker for Steamship Mutual?
The parties admit that Steamship Mutual is a P & I Club. Steamship Mutual admits it does not have a license to do business in the Philippines
although Pioneer is its resident agent. This relationship is reflected in the certifications issued by the Insurance Commission.
Petitioner insists that Steamship Mutual as a P & I Club is engaged in the insurance business. To buttress its assertion, it cites the definition of
a P & I Club in Hyopsung Maritime Co., Ltd. v. Court of Appeals[10] as “an association composed of shipowners in general who band together for the
specific purpose of providing insurance cover on a mutual basis against liabilities incidental to shipowning that the members incur in favor of third
parties.” It stresses that as a P & I Club, Steamship Mutual’s primary purpose is to solicit and provide protection and indemnity coverage and for this
purpose, it has engaged the services of Pioneer to act as its agent.
Respondents contend that although Steamship Mutual is a P & I Club, it is not engaged in the insurance business in the Philippines. It is
merely an association of vessel owners who have come together to provide mutual protection against liabilities incidental to shipowning.[11]
Respondents aver Hyopsung is inapplicable in this case because the issue in Hyopsung was the jurisdiction of the court over Hyopsung.
Is Steamship Mutual engaged in the insurance business?
Section 2(2) of the Insurance Code enumerates what constitutes “doing an insurance business” or “transacting an insurance business”. These
are:
(a) making or proposing to make, as insurer, any insurance contract;
(b) making, or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate
business or activity of the surety;
(c) doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business
within the meaning of this Code;
(d) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this
Code.
. . .
The same provision also provides, the fact that no profit is derived from the making of insurance contracts, agreements or transactions, or that
no separate or direct consideration is received therefor, shall not preclude the existence of an insurance business.[12]
The test to determine if a contract is an insurance contract or not, depends on the nature of the promise, the act required to be performed, and
the exact nature of the agreement in the light of the occurrence, contingency, or circumstances under which the performance becomes requisite. It is
not by what it is called.[13]
Basically, an insurance contract is a contract of indemnity. In it, one undertakes for a consideration to indemnify another against loss, damage
or liability arising from an unknown or contingent event.[14]
In particular, a marine insurance undertakes to indemnify the assured against marine losses, such as the losses incident to a marine adventure. [15]
Section 99[16] of the Insurance Code enumerates the coverage of marine insurance.
Relatedly, a mutual insurance company is a cooperative enterprise where the members are both the insurer and insured. In it, the members all
contribute, by a system of premiums or assessments, to the creation of a fund from which all losses and liabilities are paid, and where the profits are
divided among themselves, in proportion to their interest. [17] Additionally, mutual insurance associations, or clubs, provide three types of coverage,
namely, protection and indemnity, war risks, and defense costs.[18]
A P & I Club is “a form of insurance against third party liability, where the third party is anyone other than the P & I Club and the
members.”[19] By definition then, Steamship Mutual as a P & I Club is a mutual insurance association engaged in the marine insurance business.
The records reveal Steamship Mutual is doing business in the country albeit without the requisite certificate of authority mandated by Section
187[20] of the Insurance Code. It maintains a resident agent in the Philippines to solicit insurance and to collect payments in its behalf. We note that
Steamship Mutual even renewed its P & I Club cover until it was cancelled due to non-payment of the calls. Thus, to continue doing business here,
Steamship Mutual or through its agent Pioneer, must secure a license from the Insurance Commission.
Since a contract of insurance involves public interest, regulation by the State is necessary. Thus, no insurer or insurance company is allowed to
engage in the insurance business without a license or a certificate of authority from the Insurance Commission.[21]
Does Pioneer, as agent/broker of Steamship Mutual, need a special license?
Pioneer is the resident agent of Steamship Mutual as evidenced by the certificate of registration [22] issued by the Insurance Commission. It has
been licensed to do or transact insurance business by virtue of the certificate of authority[23] issued by the same agency. However, a Certification
from the Commission states that Pioneer does not have a separate license to be an agent/broker of Steamship Mutual.[24]
Although Pioneer is already licensed as an insurance company, it needs a separate license to act as insurance agent for Steamship Mutual.
Section 299 of the Insurance Code clearly states:
SEC. 299 . . .
No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of applications for insurance, or receive for
services in obtaining insurance, any commission or other compensation from any insurance company doing business in the Philippines or any agent
thereof, without first procuring a license so to act from the Commissioner, which must be renewed annually on the first day of January, or within six
months thereafter. . .
Finally, White Gold seeks revocation of Pioneer’s certificate of authority and removal of its directors and officers. Regrettably, we are not the
forum for these issues.
WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated July 30, 2002 of the Court of Appeals affirming the Decision
dated May 3, 2000 of the Insurance Commission is hereby REVERSED AND SET ASIDE. The Steamship Mutual Underwriting Association
(Bermuda) Ltd., and Pioneer Insurance and Surety Corporation are ORDERED to obtain licenses and to secure proper authorizations to do business
as insurer and insurance agent, respectively. The petitioner’s prayer for the revocation of Pioneer’s Certificate of Authority and removal of its
directors and officers, is DENIED. Costs against respondents.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.
FIRST DIVISION
ROBLE ARRASTRE, INC., G.R. No. 128509

Petitioner,
Present:
PANGANIBAN, C.J.
- versus - Chairperson,
YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJO, SR., and
HON. ALTAGRACIA VILLAFLOR and THE CHICO-NAZARIO, JJ.
HONORABLE COURT OF APPEALS,
Respondents. Promulgated:
August 22, 2006

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DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari, assailing the 7 October 1996 Decision [1] and the 13 February 1997 Resolution [2] of the
Court of Appeals in CA-G.R. SP No. 40621, which reversed and set aside the 29 March 1995 Decision [3] of the Regional Trial Court (RTC), Branch
XVIII, Hilongos, Leyte, in Special Civil Action No. H-237.
The Antecedents
Petitioner Roble Arrastre, Inc. is a cargo handling service operator, authorized by the Philippine Ports Authority (PPA) through Permit No.
M92-005 to provide and render arrastre and stevedoring services at the Municipal Port of Hilongos, Leyte, and on all vessels berthed thereat, from 7
September 1992 to 15 September 1993. [4] For the years 1992 and 1993, petitioner was granted Business Permits No. 349 and No. 276, respectively,
by respondent Altagracia Villaflor as Municipal Mayor of Hilongos, Leyte. On 14 December 1993, pending final consideration of petitioner’s
application for renewal with the PPA Office, Manila, the PPA through its Port Manager Salvador L. Reyna of the Tacloban Port Management Office
issued a 90-day hold-over authority to petitioner. Stated therein was the proviso that notwithstanding the 90-day period aforementioned, the authority
shall be deemed ipso facto revoked if an earlier permit/contract for cargo handling services is granted or sooner withdrawn or cancelled for cause
pursuant to PPA Administrative Order No. 10-81. On 27 January 1994, while the 90-day hold-over authority was in effect, petitioner filed with
respondent mayor an application for the renewal of its Business Permit No. 276. However, the same was denied.
Aggrieved by the denial, petitioner filed with the RTC, a Petition for Mandamus with Preliminary Mandatory Injunction [5] against
respondent mayor, raising the primary ground that the refusal to issue the business license sought for was a neglect to perform an act which the law
enjoins her to do, by virtue of the office she occupies. According to petitioner, the source of the power of the municipal mayor to issue licenses is
Section 444(b)(3)(iv) [6] of Republic Act No. 7160, otherwise known as the Local Government Code of 1991, which is merely for the purpose of
revenue generation and not regulation, hence, the municipal mayor has no discretion to refuse the issuance of a business license following the
applicant’s payment or satisfaction of the proper license fees. [7] Petitioner further alleged that it is the PPA which is vested with the discretion to
determine whether a party can render arrastre service in a particular port area. [8]
In answer thereto, respondent mayor averred, inter alia, that the remedy of mandamus does not lie as the issuance of the permit
sought is not a ministerial function, but one that requires the exercise of sound judgment and discretion. [9] In denying petitioner’s application,
respondent mayor invoked Municipal Resolution No. 93-27, [10] passed by the Sangguniang Bayan of Hilongos, Leyte, on 17 March 1993, which
prohibits any party which likewise operates shipping lines plying the route of Cebu to Hilongos and vice versa, from engaging in arrastre and
stevedoring services at the port of Hilongos. [11] Respondent mayor asserted that petitioner is owned and operated by Roble Shipping Lines, a
shipping company that operates along the routes specified in Municipal Resolution No. 93-27; [12] hence, effectively rendering petitioner
disqualified from operating an arrastre service therein. [13] Finally, by way of counterclaim, respondent mayor sought moral and exemplary
damages, attorney’s fees and expenses of litigation. [14]
On 16 May 1994, petitioner filed a Supplemental Petition, [15] contending that subsequent to the filing of the Petition for
Mandamus with the RTC, it was granted by the PPA a five-year contract [16] to provide cargo handling and other related services at the Port of
Hilongos, Leyte, effective 1 March 1994. The aforesaid contract was indorsed by the District Manager for the Visayas to the Port Manager of
Tacloban. Moreover, petitioner sought to incorporate the five-year contract as an integral part of its Petition. The Supplemental Petition was
admitted by the RTC, in the Order [17] dated 19 July 1994.
On 19 September 1994, the RTC issued a Pre-Trial Order containing the following admitted stipulations of facts, to wit:
1. That petitioner in 1993 was issued a Mayor’s Permit No. 276 on January 29, 1993, [as] shown by Annex “B” of the petition;
2. [That petitioner paid] for Business and License Permit for the year 1994 in the amount of P9,789.48 under Official Receipt No. 7534455-
C;
3. [That petitioner procured a] Barangay Clearance.
In the same Order, the RTC denied the parties’ motion that the case be submitted on the pleadings since no judgment on the pleadings
could be had as there were controverted issues material to the case.
The Ruling of the RTC

The RTC opined that the PPA has the sole authority to grant permits in the operation of cargo handling services in all Philippine ports,
whether public or private. Proceeding therefrom, it ruled that the refusal of respondent mayor to approve petitioner’s application for renewal of the
business permit was not based on law nor upon her discretion.
The RTC ratiocinated in this wise, thus:
As can be read the resolution is to object to the approval of a five (5) year management contract for Arrastre and Stevedoring Services in
the port of Hilongos, Leyte, applied by the Roble Arrastre, Inc. with the concomitant reason that the Sangguniang Bayan finds it logical and ethical
not to grant any permit to any group or corporation in the municipal port of Hilongos who are operators of Shipping Lines flying (sic) the route from
Cebu to Hilongos and vice-versa to protect the business interest of the shipping industry of the municipality. This resolution is signed by the
Municipal Vice Mayor as Presiding Officer of Sangguniang Bayan and approved by the Mayor. To the mind of the court the approval of the Mayor
in a resolution by the Sangguniang Bayan is superfluous. This is not an ordinance that should be signed by the mayor in order to become effective as
a law but a resolution of that august body. The above resolution was approved on March 17, 1993 not withstanding (sic) the fact that as shown by the
wordings thereat there was already a public hearing conducted by PPA Manila on March 9, 1993 at the Municipal Multi[-] Purpose Center. The
Municipal Mayor was present and complaints were entertained by the Hearing Officers from several shippers of Hilongos, Leyte. As appearing also
in the lower portion of the said resolution, the same was furnished PPA Manila and the respondent admitted that she did not even know whether a
copy had been sent by the Sangguniang Bayan to the concerned offices. Granting that this resolution reached the General Manager, PPA, Manila, she
have (sic) not pursued any action on the matter nor the Office of the Mayor and the Sangguniang Bayan received any information of what proper
action was taken therein. It is indeed unfortunate that whatever nature of the complaints which was heard during the public hearing by the
representative of the PPA, it is not shown whether PPA lend (sic) an ear to it. The fact remains that on March 1, 1994[,] nearly 1 year after this
resolution and public hearing, the petitioner, Roble Arrastre, Inc., was given a contract by PPA who has the authority under P.D. 875 [20] (sic) to
issue the same.
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x x x The law is clear that under P.D. 875 the sole authority to authorize operation of cargo handling services in all ports of the Philippines
whether public or private is lodge (sic) with the Philippine Ports Authority. Under the said law the granting of permits is through the PPA Board
carried out by the General Manager or his assistant. This Court has taken noticed (sic) also that no ordinance had been passed by the Sangguniang
Bayan and approved by the Municipal Mayor of Hilongos, Leyte, in accordance with the Local Government with regards to the port operation in the
port of Hilongos nor there was [a] showing that the Executive Officer of the municipality has anything to say on the power and jurisdiction of the
PPA in the port of Hilongos, Leyte. This goes to show that even these public officers knows (sic) the extent of their power as regards the authority of
the PPA.
This Court is of the firmed (sic) belief and so holds that the refusal of the Municipal Mayor to approve the application for renewal is not
based on law nor upon her discretion. Under the milieu of the case the PPA is authorized and have (sic) the exclusive jurisdiction over all ports of
the Philippines and they (sic) alone can issue cargo handling contracts. [21]
Finding for petitioner, the court a quo disposed as follows:
PREMISES CONSIDERED, by preponderance of evidence, this Court give (sic) due course to this petition of Mandamus in favor of the
Roble Arrastre, Inc. and against the respondent, the Honorable Municipal Mayor of Hilongos sued in her capacity as a Public Officer and orders her
forthwith:
a) To approve the application of Roble Arrastre, Inc. for the year 1994 as he has already paid the necessary payments in connection therewith
albeit the same permit is now functous officio as this is now 1995. Nevertheless, this approved permit to be issued by the Mayor shall be a basis for
renewal of the said 1994 permit for the year 1995 after payment of due fees required by her office.
Without pronouncement as to costs. The counterclaim of respondent is hereby dismissed. [22]
Respondent mayor filed a Motion for Reconsideration thereon, which was denied for lack of merit by the RTC, in the Order [23] dated 25
October 1995.
The Ruling of the Appellate Court
Upon elevation of the case to the Court of Appeals, the appellate court rendered a Decision dated 7 October 1996, reversing and setting
aside the RTC. Moreover, it entered a new judgment dismissing Special Civil Action No. H-237.
The Court of Appeals ruled that the pursuit of the duty of respondent mayor under Section 444(b)(3)(iv) [24] of the Local Government
Code necessarily entails the exercise of official discretion. Hence, it held that mandamus will not lie to control or review the exercise of her
discretion. Moreover, the Court of Appeals declared that petitioner’s main prayer, i.e., to compel respondent mayor to issue a business license for the
year 1994, by the passage of time had already become moot and academic. On this score, the appellate court declared that the issue is academic.
Courts will not adjudicate moot cases nor hear a case when the object sought is no longer attainable.
The appellate court pronounced, thus:
Under Section 444(b)(3)(iv), all local chief executive officer (sic) or municipal mayors are vested with the authority to issue licenses and
permits within their jurisdiction. In the same provision, the mayor may likewise suspend or revoke a permit for any violation of the conditions upon
which the same had been issued, pursuant to law or ordinance. In effect, under said Section 444(b)(3)(iv), the municipal governments, thru its chief
executive, are endowed with the authority to exercise police power.
Evidently, the pursuit of its duty under the (sic) police power necessarily entails exercise of official discretion in order for any local
officials to ascertain which will better serve their constituents who elected them into office. Full discretion must necessarily be granted them to
perform their functions and it will not be sound logic to simply make them perform purely ministerial functions. And when the discharge of an
official duty requires the exercise of official discretion or judgment, it is never a ministerial one (Mateo vs. CA, 196 SCRA 280 [1991]).
Furthermore, where the only power given to a municipal corporation or official is to issue license, as in Section 444 of the Local
Government Code, it is clearly regulatory in nature rather than a revenue raising one. Conclusively, regulation being the object of the power to issue
license and permits the exercise of discretion by the issuing authority becomes an inescapable prerogative. This could be the very same reason why
business permits and licenses are renewed almost annually in order that the licensing officials in carrying out their functions could examine and
evaluate availing circumstances and conditions and with the exercise of discretion determine whether to grant or deny the application or, to revoke a
license or permit already issued. It should also be understood that a municipal license is not a property such that it is revocable when public interest
so requires (Pedro vs. Provincial Board of Rizal, 56 Phil. 126). [25]
The dispositive portion of the assailed Decision reads:
IN VIEW OF ALL THE FOREGOING, the appealed decision is hereby REVERSED AND SET ASIDE and a new one entered dismissing
Special Civil Action No. [H-]237. No pronouncement as to costs. [26]
Petitioner filed a Motion for Reconsideration but the same was denied by the Court of Appeals in its Resolution dated 13 February 1997.
Hence, the instant Petition.

The Issues
Petitioner, in its Memorandum, presented the following statement of issues, to wit:

I
Whether or not it was valid for the Court of Appeals to have relied on the cases of Mateo v. Court of Appeals and Pedro v. Provincial
Board of Rizal, in ruling that respondent Mayor had full discretion in issuing or renewing the Business Permit even after the petitioner duly complied
with all documentary requirements and fully paid the corresponding permit fees.
II
Whether or not the Court of Appeals validly interpreted Section 444, (3) (iv), R.A. 7160, otherwise known as the Local Government Code
of 1991, as a grant of police power and full discretion to the respondent mayor to refuse the issuance of the permit despite due compliance of all
documentary requirements and full payment of the required permit fees by the petitioner.
III
Whether or not the Court of Appeals validly rendered its Decision when it refused to apply the precedent in Symaco v. Aquino wherein this
Honorable Supreme Court held that even in the absence of any ordinance granting the respondent Mayor such discretion, she cannot refuse issuance
of the permit if there is prior compliance by the petitioner with all documentary requirement and full payment of the required permit fees.
IV
Whether or not the Court of Appeals validly rendered its Decision when it dismissed the [Petition] allegedly on the ground that it became
(sic) moot and academic. [27]
The Ruling of the Court
At the outset, we state our concurrence with the Court of Appeals when it entered a new judgment dismissing
Special Civil Action No. H-237 on the ground of mootness. The appellate court ratiocinated, to wit:
Lastly, it would seem that the main prayer of the complaint, that is, to compel the respondent mayor to issue a
business license for the year 1994, by the passage of time during which this case pends, had already become moot and academic.
A new application is necessary for the year 1995 and the year 1996 which is about to end. And in the grant or denial of such
application for business permits or licenses, the respondent mayor must examine closely the circumstances prevailing and again
use her discretion in the exercise of her official function. Accordingly, the issue at hand is already academic and it is well
established that courts will not adjudicate moot cases nor hear a case when the object sought is not attainable (State vs. Lambert,
52 W. Va. 248, 43 S. E. 176) and it will decline jurisdiction over moot cases which must involve only actual interests. (In re:
Estate of Caballos, 12 Phil. 271; Beech vs. Crossfield, 12 Phil. 555). [28]
Indeed, Courts will not determine a moot question in a case in which no practical relief can be granted. It is
unnecessary to indulge in academic discussion of a case presenting a moot question as a judgment thereon cannot have any
practical legal effect or, in the nature of things, cannot be enforced. [29] However, we are constrained to render judgment herein
pursuant to our symbolic function of educating the bench and the bar. [30] For another, this case comes within the rule that
courts will decide a question otherwise moot and academic if it is “capable of repetition yet evading review.” [31]
The crux of the instant controversy is whether respondent mayor can be compelled by a writ of mandamus to grant
petitioner’s application for a renewal of a business permit to operate an arrastre service at the Municipal Port of Hilongos in
Leyte.
Ostensibly, it is petitioner’s contention that respondent mayor’s power to issue permits as contained in the
aforesaid law is ministerial; hence, mandamus lies.
It bears to reiterate this Court’s ruling on the nature of the writ of mandamus. The writ of mandamus serves
to compel a respondent who fails to perform a legal duty or unlawfully excludes another from the enjoyment of an entitled right
or office to do the act required to be done to protect the rights of the petitioner. [32] Otherwise stated, mandamus is issued to
command the performance of a ministerial, but not a discretionary duty.
With that settled, we make a determination of the nature of the power of respondent mayor to grant petitioner a permit
to operate an arrastre service. Central to the resolution of the case at bar is a reading of Section 444(b)(3)(iv) of the Local
Government Code of 1991, which provides, thus:
SEC. 444. The Chief Executive: Powers, Duties, Functions and Compensation.
(b) For efficient, effective and economical governance the purpose of which is the general welfare of the municipality
and its inhabitants pursuant to Section 16 of this Code, the Municipal mayor shall:
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(3) Initiate and maximize the generation of resources and revenues, and apply the same to the implementation of
development plans, program objectives and priorities as provided for under Section 18 of this Code, particularly those resources
and revenues programmed for agro-industrial development and country-wide growth and progress, and relative thereto, shall:
xxxx
(iv) Issue licenses and permits and suspend or revoke the same for any violation of the conditions upon which said
licenses or permits had been issued, pursuant to law or ordinance. (Italics supplied.)
As Section 444(b)(3)(iv) so states, the power of the municipal mayor to issue licenses is pursuant to Section
16 of the Local Government Code of 1991, which declares:
SEC. 16. General Welfare. - Every local government unit shall exercise the powers expressly granted, those
necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for its efficient and effective governance,
and those which are essential to the promotion of the general welfare. Within their respective territorial jurisdictions, local
government units shall ensure and support, among other things, the preservation and enrichment of culture, promote health and
safety, enhance the right of the people to a balanced ecology, encourage and support the development of appropriate and self-
reliant scientific and technological capabilities, improve public morals, enhance economic prosperity and social justice, promote
full employment among their residents, maintain peace and order, and preserve the comfort and convenience of their inhabitants.
Section 16, known as the general welfare clause, encapsulates the delegated police power to local governments. Local
government units exercise police power through their respective legislative bodies. [33] Evidently, the Local Government Code
of 1991 is unequivocal that the municipal mayor has the power to issue licenses and permits and suspend or revoke the same for
any violation of the conditions upon which said licenses or permits had been issued, pursuant to law or ordinance. On this
matter, petitioner maintains that under the Local Government Code of 1991, a suspension or revocation of permits shall be
premised on a finding of violation of the conditions upon which the permits were issued pursuant to a law or ordinance, which is
independent of the Code itself. Petitioner asseverates further that there was no law or ordinance that conferred upon the
respondent mayor the power to refuse the issuance of the permit despite compliance of petitioner with all documentary
requirements and payment of all the fees.
First. On petitioner’s assertion that the power to issue license should be pursuant to law other than the Local
Government Code of 1991, we so hold that the language of the law did not find the need to distinguish between other laws and
that of the Local Government Code of 1991 itself. When the law does not distinguish, we must not distinguish. [34] Ubi lex non
distinguit nec nos distinguere debemus. Hence, even the Local Government Code of 1991, specifically Section 16 thereof, can be
utilized to determine the bounds of the exercise of the municipal mayor in issuing licenses and permits.
Second. While we agree with petitioner that there is no ordinance conferring upon the respondent mayor the power to
refuse the issuance of the permit for the operation of an arrastre service, we are, as yet, unprepared to declare that the power of
the municipal mayor as enunciated under Section 444(b)(3)(iv) is ministerial. What can be deduced from the aforesaid section is
that the limits in the exercise of the power of a municipal mayor to issue licenses, and permits and suspend or revoke the same
can be contained in a law or an ordinance. Otherwise stated, a law or an ordinance can provide the conditions upon which the
power of the municipal mayor under Section 444(b)(3)(iv) can be exercised. Section 444(b)(3)(iv) of the Local Government
Code of 1991 takes its cue from Section 16 thereof, which is largely an exercise of delegated police power. We said:
The general welfare clause is the delegation in statutory form of the police power of the State to LGUs. Through this,
LGUs may prescribe regulations to protect the lives, health, and property of their constituents and maintain peace and order
within their respective territorial jurisdictions. Accordingly, we have upheld enactments providing, for instance, the regulation of
gambling, the occupation of rig drivers, the installation and operation of pinball machines, the maintenance and operation of
cockpits, the exhumation and transfer of corpses from public burial grounds, and the operation of hotels, motels, and lodging
houses as valid exercises by local legislatures of the police power under the general welfare clause. [35]
Section 444(b)(3)(iv) of the Local Government Code of 1991, whereby the power of the respondent mayor to issue
license and permits is circumscribed, is a manifestation of the delegated police power of a municipal corporation. [36]
Necessarily, the exercise thereof cannot be deemed ministerial. As to the question of whether the power is validly exercised, the
matter is within the province of a writ of certiorari, but certainly, not of mandamus.
It may be true, as argued by petitioner, that Resolution No. 93-27, which was enacted by the Sangguniang Bayan of
Hilongos, is not an ordinance but merely a resolution. A municipal ordinance is different from a resolution. An ordinance is a
law, but a resolution is merely a declaration of the sentiment or opinion of a lawmaking body on a specific matter. An ordinance
possesses a general and permanent character, but a resolution is temporary in nature. Additionally, the two are enacted differently
- a third reading is necessary for an ordinance, but not for a resolution, unless decided otherwise by a majority of all the
Sanggunian members. [37]
However, the fact that Resolution No. 93-27 is a “mere” resolution can do nil to support petitioner’s cause. As stated
earlier, the proper action is certiorari to determine whether grave abuse of discretion had been committed on the part of
respondent mayor in the refusal to grant petitioner’s application. Petitioner’s petition for mandamus is incompetent against
respondent mayor’s discretionary power. Thus:
“Discretion,” when applied to public functionaries, means a power or right conferred upon them by law or acting
officially, under certain circumstances, uncontrolled by the judgment or conscience of others. A purely ministerial act or duty in
contradiction to a discretional act is one which an officer or tribunal performs in a given state of facts, in a prescribed manner, in
obedience to the mandate of a legal authority, without regard to or the exercise of his own judgment upon the propriety or
impropriety of the act done. If the law imposes a duty upon a public officer and gives him the right to decide how or when the
duty shall be performed, such duty is discretionary and not ministerial. The duty is ministerial only when the discharge of the
same requires neither the exercise of official discretion or judgment. [38]
The Fallo
WHEREFORE, the Petition is DENIED. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 40621, dated
7 October 1996 and 13 February 1997, respectively, dismissing Special Civil Action No. H-237 are AFFIRMED. Costs against petitioner.
SO ORDERED.
FIRST DIVISION
SKIPPERS UNITED PACIFIC, INC., and J.P. G.R. No. 166363

SAMARTZSIS MARITIME ENTERPRISES CO.,
S.A.,
Petitioners, Present:
PANGANIBAN, C.J.
Chairperson,
- versus - YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJO, SR., and
JERRY MAGUAD and PORFERIO CHICO-NAZARIO, JJ.
CEUDADANO,
August 15, 2006

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DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari seeking to review and set aside the Decision [1] and Resolution
[2] of the Court of Appeals dated 27 July 2004 and 14 December 2004, respectively, in CA-G.R. SP No. 80651, which declared
null and void the Resolutions of the National Labor Relations Commission (NLRC) dated 26 May 2003 [3] and 8 September
2003. [4]
The antecedent facts of the case are as follows:
Herein petitioners are Skippers United Pacific, Inc., the former manning agency for the vessel MV Hanjin Vancouver,
and its foreign principal, J.P. Samartzsis Maritime Enterprises Co., S.A. Herein respondents Jerry Maguad and Porferio
Ciudadano were recruited by petitioner Skippers United Pacific, Inc., to work on board the afore-mentioned vessel as 4th
Engineer and Bosun, respectively. Respondents lodged a complaint against petitioners before the NLRC. In their Position Paper,
[5] they alleged, among other things, that:
Sometime in June 1998, complainants [herein respondents] were contracted by respondent [herein petitioner] Skippers
[United Pacific, Inc.], to work on board the vessel MV “Hanjin Vancouver,” as Fitter for a contract period of nine (9) months
plus or minus one (1) month pay [by] mutual consent. In a POEA contract of employment, [6] complainant had to work under
the following terms and conditions:
JERRY P. MAGUAD
POSITION : 4th Engineer

BASIC MO. SALARY : US$536.00
HOURS OF WORK : 48 hours/week
FIXED OVERTIME : US$160.80
OT AFTER 105/HRS : US$3.22
LEAVE PAY : US$107.20
PORFERIO L. CIUDADANO
POSITION : Bosun
HOURS OF WORK : 48 hours/week
FIXED OVERTIME : US$135.30
OT AFTER 105/HRS : US$2.71
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However, [these] contracts were adjusted by respondent Skipper’s representative in the person of their General Manager, Ms. Gloria N.
Almodiel, and was further noted by the Owner’s representative Mr. Filippos Karabatsis. The adjustments made were as follows [7]:
JERRY P. MAGUAD

FIXED OVERTIME : US$681.00 (105 hrs)
OVERSEAS ALLOWANCE : US$126.00
OT (AFTER 105/HRS) : US$6.61

FIXED OVERTIME : US$453.00 (105 hrs)
OVERSEAS ALLOWANCE : US$126.00
OT (AFTER 105/HRS) : US$4.40
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On or about June 14, 1998, complainants joined [their] vessel of assignment at the port of Korea to work thereon in accordance with the
aforesaid contract of employment. Thereafter, [they] performed their official functions and duties diligently and efficiently.
However, on July 29, 1998 at the port of Osaka, Japan, [they were] unceremoniously discharged from the aforesaid vessel and immediately
repatriated to Manila without being given any notice of the reason for their discharge and without giving [them] an opportunity to be heard. Despite
earnest demands, respondents unjustifiably failed and refused to pay complainants’ unexpired portion of [their] contract. [8]
Petitioners, on the other hand, contended that they could not be held liable for illegal dismissal because the respondents were dismissed for
cause, that is, for incompetence. The petitioners, in their Position Paper before the NLRC, averred, among other things, that:
On or about 8 June 1998, complainants [herein respondents] Maguad and Ciudadano were both contracted by respondent [herein petitioner]
Skippers United Pacific, Inc. (for and in behalf of its principal, J.P. Samartzsis Maritime Enterprises Co. S.A.) to serve as 4th Engineer and Bosun,
respectively for the vessel MV “Hanjin Vancouver” for a contract period of nine (9) months plus or minus one (1) month by mutual consent for the
following salaries:
JERRY P. MAGUAD

FIXED OVERTIME PAY : US$160.80
OT AFTER 105/HOURS : US$3.22

FIXED OVERTIME PAY : US$135.30
OT AFTER 105/HOURS : US$2.71
On or about 24 June 1998, complainants boarded the vessel MV Hanjin Vancouver; however, less than one (1) month from their
arrival on board said vessel, the vessel’s Master reported both complainants’ incompetence and the Owners in a telex message dated 21 July 1998
informed herein respondent Skippers United Pacific, Inc. of the urgent need to replace both Maguad and Ciudadano for their incompetence and
enormous difficulties produced thereof to the work on board.
On or about 29 July 1998, both complainants were repatriated from Pusan, Korea with herein respondent advancing their repatriation costs.
[9]
Consequently, upon repatriation, respondents filed a Complaint for Illegal Dismissal on 14 August 1998 before the Arbitration Branch of
the NLRC with prayer for payment of salaries for the unexpired portion of their contract, moral and exemplary damages, and attorney’s fees. The
Labor Arbiter issued a Decision [10] on 20 September 1999 finding respondents to have been illegally dismissed. The dispositive portion of which
reads, thus;
WHEREFORE, premises considered, judgment is hereby rendered declaring that complainants [herein respondents] have indeed been
illegally dismissed from their employment. Accordingly, respondents [herein petitioners] are hereby directed to pay [herein respondents] their
respective three (3) months’ salaries, as follows:
(a) For Jerry P. Maguad – US$5,808.00
(b) Porferio L. Ciudadano – US$3,990.00
On appeal by petitioners, the NLRC en banc in its Resolution [11] dated 31 May 2001, remanded the case to the Arbitration Branch of
origin for immediate further proceedings for failure of the Labor Arbiter to appreciate material evidence such as: (1) the logbook extracts submitted
by petitioners to corroborate its defense that respondents were dismissed for incompetence and (2) the confirmation letters presented by the
respondents showing that they were signed off to transfer to another vessel due to crew reduction per Administration’s status and Owner’s Orders.
Both parties had questioned the authenticity and veracity of the documentary evidence presented by the opposing party.
To conform to the Resolution of the NLRC dated 31 May 2001, the Labor Arbiter conducted further proceedings. The Labor Arbiter
rendered a Decision [12] on 13 February 2002 dismissing the respondents for being unfit and incompetent to perform their respective functions,
overturning his previous Decision of 20 September 1999. The dispositive portion reads, thus:
WHEREFORE, in the light of the foregoing premises, the above-entitled case is hereby DISMISSED for being devoid of legal merit.
To justify his findings, the Labor Arbiter made the following discussions, thus:
After a careful re-evaluation of the evidence on record, this Office finds that it indeed overlooked the fact that there are pieces of
evidence for the respondents other than the telex mentioned in the subject Decision. That contrary to its findings in the questioned Decision dated
20 September 1999 that respondents’ evidence in support of their defense in this case consists solely of an “uncorroborated telex message,”
respondents actually have adduced other pertinent evidence such as logbook extracts and the Master’s Statement supporting such logbook entries.
Be it emphasized at this juncture that in our jurisdiction, it is settled and recognized that logbook entries constitute prima facie evidence of the facts
contained therein and have enjoy the stamp of presumption of regularity. [13]
Aggrieved, it was the respondents’ turn to interpose an appeal before the NLRC en banc. The NLRC rendered a Resolution [14] on 26
May 2003 affirming the afore-quoted findings of the Labor Arbiter, thus:
WHEREFORE, premises considered, the assailed decision is hereby affirmed. Complainant’s appeal is dismissed for lack of merit.
Respondents moved for the reconsideration of the foregoing decision of the NLRC. However, said Motion for Reconsideration was denied
through a Resolution [15] issued by the NLRC on 8 September 2003. Consequently, respondents filed a Petition for Certiorari before the Court of
Appeals docketed as CA-G.R. SP No. 80651.
The Court of Appeals rendered a Decision [16] on 27 July 2004 granting the petition and declaring null and void the Resolutions of the
NLRC dated 26 May 2003 and 8 September 2003, and reinstating the Decision [17] of the Labor Arbiter dated 20 September 1999, to wit:
WHEREFORE, in consideration of the foregoing, the petition for certiorari is perforce granted. Accordingly, the Resolutions of the public
respondent NLRC dated 26 May 2003 and 8 September 2003 are hereby declared null and void. Accordingly, the Decision of the Honorable Labor
Arbiter dated 20 September 1999 is hereby reinstated.
On 26 August 2004, petitioners filed a Motion for Reconsideration of the 27 July 2004 Decision of the Court of Appeals alleging that
Skippers United Pacific, Inc., should not be made liable because: (1) it is no longer the manning agency responsible since Sea Power Shipping
Enterprises, Inc., and Evic Human Resources Management, Inc., had executed Affidavits of Assumption of Responsibility, and (2) it has complied
with the legal requirements for the dismissal of an employee.
The Court of Appeals denied the Motion for Reconsideration in its Resolution dated 14 December 2004 because the grounds and arguments
relied upon by the petitioners were already heard and considered by the Court of Appeals in their Decision promulgated on 27 July 2004.
Hence, this Petition.
Petitioners submit that the Court of Appeals committed a reversible error in rendering its Decision and Resolution dated 27 July 2004 and
14 December 2004, respectively, for they are contrary to law and existing jurisprudence. Hence, petitioners presented before this Court the following
issues:
I Whether or not the warning notices given to respondents substantially [complied] with the requirements of the Labor Code in effecting a
valid dismissal.
II Whether or not the Court of Appeals may reinstate a Decision of the Labor Arbiter, which the latter himself reversed and considered
flawed. [18]
In the Memorandum [19] filed by petitioners, they maintain that there was just and valid cause for the dismissal of the respondents. Thus,
petitioners posit that the only issue relevant to the dismissal of the respondents in this Petition is the question on compliance with the two- notice
requirement mandated by the Labor Code, as amended. [20]
The petitioners argue that the Court of Appeals seriously erred in not considering the warning notices issued to respondents as substantial
compliance with the requirements laid down in the Labor Code, as amended, in effecting a valid dismissal. According to petitioners, such notices
were issued days before respondents were signed-off on 29 July 1998, so that ample opportunity was given to the respondents to defend themselves
and refute the accusations against them. Thus, petitioners stand firm on their position that the dismissal of the respondents was with cause and there
was compliance with the requirement of due process in effecting a valid dismissal.
Petitioners further claim that it was reversible error on the part of the Court of Appeals to reinstate a Decision of the Labor Arbiter, which
the latter himself reversed and considered flawed for his failure to consider other pieces of evidence which were presented by both parties.
In contrast, the respondents raise before this Court the following issues:
I. Whether or not Rule 45 is proper in the instant case.
II. Whether or not the decision of the Court of Appeals is erroneous.
III. Whether or not petitioner Skippers can be exempted from liability by the execution of Affidavits of Assumption of Responsibility executed
by Sea Power Shipping Enterprises, Inc. and Evic Human Resources Management, Inc.
IV. Whether or not private respondents Maguad and Ciudadano are entitled to indemnity equivalent to the unexpired portion of their
employment contract. [21]
Respondents in their Memorandum [22] aver that petitioners raised questions of facts when they contended that the documents submitted to
the Labor Arbiter already constitute the notices required under respondents’ employment contracts, and that these notices served as compliance with
due process in effecting a valid dismissal; hence, Rule 45 of the Rules of Court is not the proper mode of appeal before this Court.
They also maintain that their alleged incompetence was not properly proven and their dismissal was tainted with illegality because they
were not afforded due process. On this basis, respondents are claiming entitlement to the amount of their salary for the unexpired portion of their
employment contract.
Lastly, respondents aver that petitioner Skippers United Pacific, Inc. cannot be exempted from liability despite the execution of the
Affidavits of Assumption of Responsibility by Sea Power Shipping Enterprises and Evic Human Resources Management, Inc. because the above-
mentioned affidavits are only valid and binding between the principal and the manning agent. It should not affect petitioner Skippers United Pacific,
Inc.’s liability towards the seamen, specifically respondents, because the liabilities of the said petitioner as manning agency is joint and solidary with
its principal and respondents’ actual employer, co-petitioner J.P. Samartzsis Maritime Enterprises Co., S.A.
Given the foregoing arguments raised by both parties, this Court identifies the following issues for resolution in the Petition at bar, viz:
I. Can this Court take cognizance of the Petition for Review under Rule 45 of the Rules of Court considering that the petitioners raised issues
of facts?
II. Whether the ground of incompetence as a just cause for a valid dismissal has been proven by substantial evidence.
III. Whether the Court of Appeals erred in its findings that there was non-compliance with the two-notice requirement in effecting a valid
dismissal as mandated by the Labor Code, as amended.
IV. Whether the respondents are entitled to indemnity equivalent to the unexpired portion of their employment contract.
Although as a rule, only legal issues may be raised in a Petition for Review on Certiorari under Rule 45 of the Rules of Court, the Court is
not precluded from delving into and resolving issues of facts, [23] particularly if the findings of the Labor Arbiter are inconsistent with those of the
NLRC and the Court of Appeals; if the findings of the NLRC and the appellate court are contrary to the evidence and the record; and in order to give
substantial justice to the parties. [24]
In this case, the Labor Arbiter and the NLRC en banc ruled that the respondents were validly dismissed by the petitioners because of
incompetence in performing their duties and responsibilities. In effecting such dismissal, the petitioners complied substantially with the two-notice
requirement for procedural due process in labor cases. However, the Court of Appeals stated in its 27 July 2004 Decision that the respondents’
alleged incompetence if any, was not properly proven, and these remained plain allegations without any proof to substantiate the same. Furthermore,
petitioners failed to comply with the two-notice requirement in effecting a valid dismissal. Since there are conflicts in the findings of the Court of
Appeals, on one hand, and the Labor Arbiter and the NLRC, on the other, it is incumbent upon this Court to resolve the issues of fact in order to give
substantial justice to both parties. Hence, this Court can take cognizance of this Petition.
The general rule is that, factual findings of the NLRC, particularly where the NLRC and the Labor Arbiter are in agreement, are deemed
binding and conclusive upon the Supreme Court. [25] Such factual findings of labor officials are conclusive and binding when supported by
substantial evidence, meaning, that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. [26]
Thus, the Supreme Court will not uphold erroneous conclusions of the NLRC as when it finds insufficient or insubstantial evidence on record to
support those factual findings. The same holds true when it is perceived that far too much is concluded, inferred, or deduced from the bare or
incomplete facts appearing of record. [27]
Accordingly, the rule that the factual findings of the administrative bodies are accorded great weight and respect and even finality by this
Court does not apply in the present case because of the apparent conflict in the findings of the administrative bodies and that of the appellate court.
This Court therefore finds it necessary to go over the records of the case to determine whether the dismissal of the respondents has been properly
proven by substantial evidence.
It must be noted that in termination cases, the burden of proof rests upon the employer to show that the dismissal of the employee is for just
cause and failure to do so would mean that the dismissal is not justified. This is in consonance with the guarantee of security of tenure in the
Constitution [28] and elaborated in the Labor Code. [29] A dismissed employee is not required to prove his innocence of the charges leveled against
him by his employer. [30] The determination of the existence and sufficiency of a just cause must be exercised with fairness and in good faith and
after observing due process. [31] Hence, there are two requisites which must be complied with by an employer for a valid dismissal, to wit:
I. the dismissal must be for a just or authorized cause; and,
II. the employee must be afforded due process, i.e., he must be given opportunity to be heard and to defend himself.
The Labor Code, as amended, laid down the just or valid causes in dismissing an employee, thus:
Art. 282. TERMINATION BY EMPLOYER. – An employer may terminate an employment for any of the following causes.
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his
work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly
authorized representative; and
(e) Other causes analogous to the foregoing.
In the case before this Court, the ground relied upon by the petitioners in dismissing the respondents is incompetence. Although
incompetence or inefficiency as a ground for a valid dismissal is not expressly written in Article 282 as one of the just causes in dismissing an
employee, this ground is considered as analogous to those enumerated under said article. Additionally, incompetence is a ground specifically
provided for in Section H of the Philippine Overseas Employment Administration (POEA) Standard Employment Contract [32] to validly dismiss an
erring seaman. Such incompetence or inefficiency is understood to mean failure to attain work goals or work quotas, either by failing to complete the
same within the allotted reasonable period, or by producing unsatisfactory results. [33] In proving the alleged incompetence of the respondents, the
Labor Arbiter as well as the NLRC, based their findings on the telefax message, [34] logbook extracts, and the Master’s Statement Report.
While going over the records of the case, this Court finds that the logbook extracts presented by the petitioners before the administrative
bodies failed to specify the particular acts or omissions of the respondents which apparently displayed their alleged incompetence. Such details are
vital in proving whether the respondents are indeed incompetent to perform their assigned duties and responsibilities. While the logbook extracts
presented by the petitioners dated 22 July 1998, [35] mentioned that respondent Maguad was inexperienced because he did not operate E/R Machines
satisfactorily, it did not particularly described therein the manner how Maguad operated the machine that would lead to the conclusion that he was
inexperienced. With regard to respondent Ciudadano, his alleged incompetence was stated in the logbook extracts dated 24 July 1998, [36] that he
was unable to perform safety duties in spite of advices given to him. Again, his alleged incompetence was not specifically stated. Since a logbook
contains entries of the daily events in the vessel, it is irregular that the act of the respondents showing their incompetence were not stated therein with
particularity. Hence, absent a more detailed narration in the logbook entry of the circumstances surrounding respondents’ alleged incompetence, the
same cannot constitute a valid justification for their dismissal.
Additionally, the entries in the logbook stating the alleged incompetence of the respondents are contrary to what was stated in the
confirmation letters issued by the captain of the vessel on the same date that the respondents were repatriated to Manila. The said confirmation letters
[37] contain statements that the respondents were signed off in order to transfer them to another vessel due to crew reduction. It was not cited in those
letters that respondents were signed off because of their incompetence to perform their duties. Ship Captain G. Aravadinos Karlatos duly signed such
confirmation letters, which also bear the seal of the vessel M/V Hanjin Vancouver.
Moreover, the Master’s Statement Report, [38] presented by the petitioners, to corroborate their claim that the dismissal of the respondents
was for just cause i.e., incompetence, was issued 17 days after the respondents were repatriated to Manila and two months after the complaint for
illegal dismissal was instituted by the respondents before the NLRC. Consequently, such report can no longer be a fair and accurate assessment of the
respondents’ competence as the same was presented only after the complaint was filed. Clearly, its execution was a mere afterthought in order to
justify the dismissal of the respondents, which had long been effected before the report was made; hence, such report is a self-serving one.
Accordingly, this Court agrees with the Court of Appeals that it was not proven through substantial evidence that the respondents were
dismissed for just cause. The incompetence of the respondents as just cause for their dismissal was not properly proven and the evidence submitted
by the petitioners before the administrative bodies are not enough to sustain the dismissal of the respondents. For this reason, this Court is not
convinced that the respondents were legally dismissed.
Nonetheless, even if there is a valid ground in dismissing the respondents, the petitioners cannot just dismiss them outright. The petitioners
must also comply with the second requisite, which is, to afford the respondents due process.
The second requisite that must be complied with by an employer for a valid dismissal is to afford the erring employee due process. The
due process requirement is not a mere formality that may be dispensed with at will. Its disregard is a matter of serious concern since it constitutes a
safeguard of the highest order in response to man’s innate sense of justice. [39] The Labor Code does not, of course, require a formal or trial type
proceeding before an erring employee may be dismissed. This is especially true in the case of a vessel on the ocean or in a foreign port. The
minimum requirement of due process in termination proceedings, which must be complied with even with respect to seamen on board a vessel,
consists of notice to the employees intended to be dismissed and the grant to them of an opportunity to present their own side of the alleged offense
or misconduct, which led to the management’s decision to terminate. [40] To meet the requirements of due process, the employer must furnish the
worker sought to be dismissed with two written notices before termination of employment can be legally effected, i.e., (1) a notice which apprises the
employee of the particular acts or omissions for which his dismissal is sought; and (2) the subsequent notice after due hearing which informs the
employee of the employers decision to dismiss him. [41]
Now, in the case at bar, this Court is convinced that the petitioners also failed to comply with the second requisite in effecting a valid
dismissal, which is to afford the respondents due process. As previously discussed herein, to meet the requirements of due process, it is
indispensable upon the employer to furnish the employee sought to be dismissed with two written notices. The warning notices [42] given by the
petitioners to the respondents cannot be deemed as substantial compliance with the two-notice requirement as mandated by the Labor Code in
effecting a valid dismissal. Those warning notices did not specify in detail the particular acts or omissions committed by the respondents which
showed their incompetence. Worse still it did not apprise them that their dismissal was sought. Such notices were stated in a general manner. It was
never mentioned therein that the petitioners would dismiss the respondents. Although the petitioners claimed that those notices were given to the
respondents days before they were repatriated, the same leaves much to be desired.
The Labor Code requires both notice and hearing; notice alone will not suffice. The requirement of notice is intended to inform the
employee concerned of the employer’s intent to dismiss him and the reason for the proposed dismissal. On the other hand, the requirement of
hearing affords the employee an opportunity to answer his employer’s charges against him and accordingly to defend himself therefrom before
dismissal is effected. [43] In this case, after the warning notices were given to the respondents, the petitioners did not give the respondents an
opportunity to present their sides by conducting a hearing as provided for in Section 17 of the POEA Contract. [44] Instead, the petitioners, with
breathless speed, ordered the repatriation of the erring employees to Manila. Therefore, the second notice, which must be given after hearing to
inform the respondents of the petitioners’ decision to dismiss them, was not complied with. In view of that, the Court of Appeals correctly ruled that
there was non-compliance with the two-notice requirement in effecting a valid dismissal.
Inasmuch as the respondents were illegally dismissed because the ground relied upon by the petitioners were not substantially proven and
there was non-compliance with the two-notice requirement in effecting a valid dismissal, they are entitled to the payment of indemnity. However,
this Court does not agree with the findings of the Court of Appeals that the provisions of Section 10 of Republic Act No. 8042, otherwise known as
the Migrant Workers’ Act of 1995, is the law applicable in computing the amount of indemnity to be paid to the respondents who have been illegally
dismissed. The said Section 10 of Republic Act No. 8042 partly provides:
In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract, the worker shall be
entitled to the full reimbursement of his placement fee with interest at twelve percent (12%) per annum, plus his salaries for the unexpired
portion of his employment contract or for three (3) months for every year of the unexpired term, whichever is less.
This Court held in the case of Marsaman Manning Agency, Inc. v. National Labor Relations Commission, [45] thus:
A plain reading of Sec. 10 clearly reveals that the choice of which amount to award an illegally dismissed overseas contract worker, i.e., whether his
salaries for the unexpired portion of his employment contract or three (3) months’ salary for every year of the unexpired term, whichever is less,
comes into play only when the employment contract concerned has a term of at least one (1) year or more. This is evident from the words
“for every year of the unexpired term” which follows the words “salaries x x x for three months.” To follow petitioners’ thinking that private
respondent is entitled to three (3) months salary only simply because it is the lesser amount is to completely disregard and overlook some words used
in the statute while giving effect to some. This is contrary to the well-established rule in legal hermeneutics that in interpreting a statute, care should
be taken that every part or word thereof be given effect since the law-making body is presumed to know the meaning of the words employed in the
statute and to have used them advisedly. Ut res magis valeat quam pereat.
Furthermore, in the case of Phil. Employ Services and Resources, Inc. v. Paramio, [46] citing the case of Skippers Pacific, Inc. v. Skippers
Maritime Service, Ltd., [47] this Court ruled that an overseas Filipino worker who is illegally terminated should be entitled to his salary equivalent to
the unexpired portion of his employment contract if such contract is less than one year.
Having said that, we apply the foregoing principles to the present case. Since the contract period of the respondents is less than one year,
more particularly, nine months plus or minus one month by mutual consent; and they were illegally dismissed, then they are entitled to their salaries
equivalent to the unexpired portion of their contract, and not just to three months salary.
With respect to the petitioner Skippers United Pacific, Inc.’s claim that it be exempted from liability because it is no longer the manning
agency responsible to the respondents since Sea Power Shipping Enterprises, Inc. and Evic Human Resources Management, Inc. had executed
Affidavits of Assumption of Responsibility, this Court will not sustain such a claim. In Section 1 of Rule II of the POEA Rules and Regulations, it
states that:
Section 1. Requirements for Issuance of License. – Every applicant for license to operate a private employment agency or manning agency
shall submit a written application together with the following requirements:
xxx
f. A verified undertaking stating that the applicant:
xxx
(3) Shall assume joint and solidary liability with the employer for all claims and liabilities which may arise in connection
with the implementation of the contract; including but not limited to payment of wages, death and disability compensation and repatriation.
Accordingly, despite the execution of the Affidavits of Assumption of Responsibility by other manning agencies, the petitioner Skippers
United Pacific Inc. cannot exempt itself from all the claims and liabilities arising from the implementation of the contract executed between the said
petitioner and the respondents. It is very clear from the above-cited provisions of the Rules and Regulations of the POEA that the manning agency
shall assume joint and solidary liability with the employer. Joint and solidary liability is meant to assure aggrieved workers of immediate and
sufficient payment of what is due them. [48] The reason for this ruling was given by this Court in Catan v. National Labor Relations Commission,
[49] which is reproduced in part below:
This must be so, because the obligations covenanted in the recruitment [manning] agreement entered into by and between the local agent and its
foreign principal are not coterminus with the term of such agreement so that if either or both of the parties decide to end the agreement, the
responsibilities of such parties towards the contracted employees under the agreement do not at all end, but the same extends up to and until the
expiration of the employment contracts of the employees recruited and employed pursuant to the said recruitment agreement. Otherwise, this will
render nugatory the very purpose for which the law governing the employment of workers for foreign jobs abroad was enacted.
Also, according to Section 10, paragraph 2 of Republic Act No. 8042, [50] the agency which deployed the employees whose employment
contract were adjudged illegally terminated, shall be jointly and solidarily liable with the principal for the money claims awarded to the aforesaid
employees. [51] Therefore, petitioner Skippers Pacific United, Inc. as the manning agency which hired the respondents is jointly and solidarily liable
with its principal and co-petitioner J.P. Samartzsis Maritime Enterprises Co., S.A., for the money claims of the respondents. The Affidavits of
Assumption of Responsibility, though valid as between petitioner Skippers United Pacific Inc. and the other two manning agencies, are not
enforceable as against the respondents because the latter were not parties to those agreements. The provisions of the POEA Rules and Regulations
are clear enough that the manning agreement extends up to and until the expiration of the employment contracts of the employees recruited and
employed pursuant to the said recruitment agreement. Hence, despite the execution of the aforementioned affidavits, petitioner Skippers United
Pacific Inc. cannot exempt itself from the liabilities and responsibilities towards the respondents.
WHEREFORE, premises considered, the instant Petition is DENIED. The Decision and Resolution of the Court of Appeals dated 27 July
2004 and 14 December 2004, respectively, in CA-G.R. SP No. 80651, finding that respondents had been illegally dismissed and that petitioners
failed to comply with the two-notice requirement of due process in effecting a valid dismissal, are hereby AFFIRMED with MODIFICATION. The
petitioners Skippers United Pacific, Inc. and J.P. Samartzsis Maritime Enterprises Co., S.A. are hereby ORDERED, jointly and severally, to pay
respondents Jerry Maguad and Porferio Ciudadano the amount of their salaries corresponding to the unexpired portion of their employment contract.
Costs against petitioners.
SO ORDERED.
SECOND DIVISION
DELSAN TRANSPORT LINES, INC., G.R. No. 149019

Petitioner,
Present:
PUNO, J., Chairperson,

- versus - SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA, and
GARCIA, JJ.
AMERICAN HOME ASSURANCE CORPORATION,
Respondent. Promulgated:
August 15, 2006

x------------------------------------------------------------------------------------x
DECISION
GARCIA, J.:
By this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Delsan Transport Lines, Inc. (Delsan hereafter)
assails and seeks to set aside the Decision, [1] dated July 16, 2001, of the Court of Appeals (CA) in CA-G.R. CV No. 40951 affirming an earlier
decision of the Regional Trial Court (RTC) of Manila, Branch IX, in two separate complaints for damages docketed as Civil Case No. 85-29357 and
Civil Case No. 85-30559.
The facts:
Delsan is a domestic corporation which owns and operates the vessel MT Larusan. On the other hand, respondent American Home
Assurance Corporation (AHAC for brevity) is a foreign insurance company duly licensed to do business in the Philippines through its agent, the
American-International Underwriters, Inc. (Phils.). It is engaged, among others, in insuring cargoes for transportation within the Philippines.
On August 5, 1984, Delsan received on board MT Larusan a shipment consisting of 1,986.627 k/l Automotive Diesel Oil (diesel oil) at the
Bataan Refinery Corporation for transportation and delivery to the bulk depot in Bacolod City of Caltex Phils., Inc. (Caltex), pursuant to a Contract
of Afreightment. The shipment was insured by respondent AHAC against all risks under Inland Floater Policy No. AH-IF64-1011549P and Marine
Risk Note No. 34-5093-6.
On August 7, 1984, the shipment arrived in Bacolod City. Immediately thereafter, unloading operations commenced. The discharging of
the diesel oil started at about 1:30 PM of the same day. However, at about 10:30 PM, the discharging had to be stopped on account of the discovery
that the port bow mooring of the vessel was intentionally cut or stolen by unknown persons. Because there was nothing holding it, the vessel drifted
westward, dragged and stretched the flexible rubber hose attached to the riser, broke the elbow into pieces, severed completely the rubber hose
connected to the tanker from the main delivery line at sea bed level and ultimately caused the diesel oil to spill into the sea. To avoid further spillage,
the vessel’s crew tried water flushing to clear the line of the diesel oil but to no avail. In the meantime, the shore tender, who was waiting for the
completion of the water flushing, was surprised when the tanker signaled a “red light” which meant stop pumping. Unaware of what happened, the
shore tender, thinking that the vessel would, at any time, resume pumping, did not shut the storage tank gate valve. As all the gate valves remained
open, the diesel oil that was earlier discharged from the vessel into the shore tank backflowed. Due to non-availability of a pump boat, the vessel
could not send somebody ashore to inform the people at the depot about what happened. After almost an hour, a gauger and an assistant surveyor
from the Caltex’s Bulk Depot Office boarded the vessel. It was only then that they found out what had happened. Thereafter, the duo immediately
went ashore to see to it that the shore tank gate valve was closed. The loss of diesel oil due to spillage was placed at 113.788 k/l while some 435,081
k/l thereof backflowed from the shore tank.
As a result of spillage and backflow of diesel oil, Caltex sought recovery of the loss from Delsan, but the latter refused to pay. As insurer,
AHAC paid Caltex the sum of P479,262.57 for spillage, pursuant to Marine Risk Note No. 34-5093-6, and P1,939,575.37 for backflow of the diesel
oil pursuant to Inland Floater Policy No. AH-1F64-1011549P.
On February 19, 1985, AHAC, as Caltex’s subrogee, instituted Civil Case No. 85-29357 against Delsan before the Manila RTC, Branch 9,
for loss caused by the spillage. It likewise prayed that it be indemnified for damages suffered in the amount of P652,432.57 plus legal interest
thereon.
Also, on May 5, 1985, in the Manila RTC, Branch 31, AHAC instituted Civil Case No. 85-30559 against Delsan for the loss caused by the
backflow. It likewise prayed that it be awarded the amount of P1,939,575.37 for damages and reasonable attorney’s fees. As counterclaim in both
cases, AHAC prayed for attorney’s fees in the amount of P200,000.00 and P500.00 for every court appearance.
Since the cause of action in both cases arose out of the same incident and involved the same issues, the two were consolidated and assigned
to Branch 9 of the court.
On August 31, 1989, the trial court rendered its decision [2] in favor of AHAC holding Delsan liable for the loss of the cargo for its
negligence in its duty as a common carrier. Dispositively, the decision reads:
WHEREFORE, judgment is hereby rendered:
A). In Civil Case No. 85-30559:
(1) Ordering the defendant (petitioner Delsan) to pay plaintiff (respondent AHAC) the sum of P1,939,575.37 with interest thereon at the legal
rate from November 21, 1984 until fully paid and satisfied; and
(2) Ordering defendant to pay plaintiff the sum of P10,000.00 as and for attorney’s fees.
For lack of merit, the counterclaim is hereby dismissed.
B). In Civil Case No. 85-29357:
(1) Ordering defendant to pay plaintiff the sum of P479,262.57 with interest thereon at the legal rate from February 6, 1985 until fully paid and
satisfied;
(2) Ordering defendant to pay plaintiff the sum of P5,000.00 as and for attorney’s fees.
For lack of merit, the counterclaim is hereby dismissed.
Costs against the defendant.
SO ORDERED.
In time, Delsan appealed to the CA whereat its recourse was docketed as CA-G.R. CV No. 40951.
In the herein challenged decision, [3] the CA affirmed the findings of the trial court. In so ruling, the CA declared that Delsan failed to
exercise the extraordinary diligence of a good father of a family in the handling of its cargo. Applying Article 1736 [4] of the Civil Code, the CA
ruled that since the discharging of the diesel oil into Caltex bulk depot had not been completed at the time the losses occurred, there was no reason to
imply that there was actual delivery of the cargo to Caltex, the consignee. We quote the fallo of the CA decision:
WHEREFORE, premises considered, the appealed Decision of the Regional Trial Court of Manila, Branch 09 in Civil Case Nos. 85-29357
and 85-30559 is hereby AFFIRMED with a modification that attorney’s fees awarded in Civil Case Nos. 85-29357 and 85-30559 are hereby
DELETED.
SO ORDERED.
Delsan is now before the Court raising substantially the same issues proffered before the CA.
Principally, Delsan insists that the CA committed reversible error in ruling that Article 1734 of the Civil Code cannot exculpate it from
liability for the loss of the subject cargo and in not applying the rule on contributory negligence against Caltex, the shipper-owner of the cargo, and in
not taking into consideration the fact that the loss due to backflow occurred when the diesel oil was already completely delivered to Caltex.
We are not persuaded.
In resolving this appeal, the Court reiterates the oft-stated doctrine that factual findings of the CA, affirmatory of those of the trial court, are binding
on the Court unless there is a clear showing that such findings are tainted with arbitrariness, capriciousness or palpable error. [5]
Delsan would have the Court absolve it from liability for the loss of its cargo on two grounds. First, the loss through spillage was partly due to the
contributory negligence of Caltex; and Second, the loss through backflow should not be borne by Delsan because it was already delivered to Caltex’s
shore tank.
Common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported by them. They are presumed to have been
at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. [6] To overcome the presumption of negligence in case of loss,
destruction or deterioration of the goods, the common carrier must prove that it exercised extraordinary diligence. There are, however, exceptions to
this rule. Article 1734 of the Civil Code enumerates the instances when the presumption of negligence does not attach:
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any
of the following causes only:
1) Flood storm, earthquake, lightning, or other natural disaster or calamity;

2) Act of the public enemy in war, whether international or civil;
3) Act or omission of the shipper or owner of the goods;
4) The character of the goods or defects in the packing or in the containers;
5) Order or act of competent public authority.
Both the trial court and the CA uniformly ruled that Delsan failed to prove its claim that there was a contributory negligence on the
part of the owner of the goods – Caltex. We see no reason to depart therefrom. As aptly pointed out by the CA, it had been established that the
proximate cause of the spillage and backflow of the diesel oil was due to the severance of the port bow mooring line of the vessel and the failure of
the shore tender to close the storage tank gate valve even as a check on the drain cock showed that there was still a product on the pipeline. To the
two courts below, the actuation of the gauger and the escort surveyor, both personnel from the Caltex Bulk Depot, negates the allegation that Caltex
was remiss in its duties. As we see it, the crew of the vessel should have promptly informed the shore tender that the port mooring line was cut off.
However, Delsan did not do so on the lame excuse that there was no available banca. As it is, Delsan’s personnel signaled a “red light” which was
not a sufficient warning because such signal only meant that the pumping of diesel oil had been finished. Neither did the blowing of whistle
suffice considering the distance of more than 2 kilometers between the vessel and the Caltex Bulk Depot, aside from the fact that it was not the
agreed signal. Had the gauger and the escort surveyor from Caltex Bulk Depot not gone aboard the vessel to make inquiries, the shore tender would
have not known what really happened. The crew of the vessel should have exerted utmost effort to immediately inform the shore tender that the port
bow mooring line was severed.
To be sure, Delsan, as the owner of the vessel, was obliged to prove that the loss was caused by one of the excepted causes if it were to
seek exemption from responsibility. [7] Unfortunately, it miserably failed to discharge this burden by the required quantum of proof.
Delsan’s argument that it should not be held liable for the loss of diesel oil due to backflow because the same had already been
actually and legally delivered to Caltex at the time it entered the shore tank holds no water. It had been settled that the subject cargo was still in the
custody of Delsan because the discharging thereof has not yet been finished when the backflow occurred. Since the discharging of the cargo into the
depot has not yet been completed at the time of the spillage when the backflow occurred, there is no reason to imply that there was actual
delivery of the cargo to the consignee. Delsan is straining the issue by insisting that when the diesel oil entered into the tank of Caltex on shore, there
was legally, at that moment, a complete delivery thereof to Caltex. To be sure, the extraordinary responsibility of common carrier lasts from the
time the goods are unconditionally placed in the possession of, and received by, the carrier for transportation until the same are delivered, actually
or constructively, by the carrier to the consignee, or to a person who has the right to receive them. [8] The discharging of oil products to Caltex
Bulk Depot has not yet been finished, Delsan still has the duty to guard and to preserve the cargo. The carrier still has in it the responsibility to
guard and preserve the goods, a duty incident to its having the goods transported.
To recapitulate, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary
diligence in vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. [9]
The mere proof of delivery of goods in good order to the carrier, and their arrival in the place of destination in bad order, make out a prima facie
case against the carrier, so that if no explanation is given as to how the injury occurred, the carrier must be held responsible. It is incumbent upon the
carrier to prove that the loss was due to accident or some other circumstances inconsistent with its liability. [10]
All told, Delsan, being a common carrier, should have exercised extraordinary diligence in the performance of its duties.
Consequently, it is obliged to prove that the damage to its cargo was caused by one of the excepted causes if it were to seek exemption
from responsibility. [11] Having failed to do so, Delsan must bear the consequences.
WHEREFORE, petition is DENIED and the assailed decision of the CA is AFFIRMED in toto.
Cost against petitioner.
SO ORDERED.
Republic of the Philippines
Supreme Court
Manila
THIRD DIVISION
ASSOCIATION OF (DSR) GERMANY AND ARIMURA SANGYO COMPANY,

INTERNATIONAL SHIPPING LTD., PACIFIC INTERNATIONAL LINES (PTE), LTD.,
LINES, INC., in its own behalf and COMPAGNIE MARITIME D’ AFFRETEMENT (CMA),
in representation of its members: YANGMING MARINE TRANSPORT CORP., NIPON YUSEN
AMERICAN TRANSPORT LINES, INC., AUSTRALIAN KAISHA, HYUNDAI MERCHANT MARINE CO., LTD.,
NATIONAL LINE, FLEET TRANS INTERNATIONAL AND MALAYSIAN INTERNATIONAL SHIPPING CORPORATION
UNITED ARAB SHIPPING CO., DONGNAMA SHIPPING CO., BERHAD, BOLT ORIENT LINE, MITSUI O.S.K. LINES,
HANJIN SHIPPING COMPANY, LTD., HAPAG-LLOYD A/G, LTD., PHILS. MICRONESIA & ORIENT NAVIGATION CO.
KNUTSEN LINE, KYOWA LINE, (PMSO LINE), LLOYD TRIESTINO DI NAVIGAZIONE
NEPTUNE ORIENT LINE, ORIENT OVERSEAS S.P.A.N., HEUNG-A SHIPPING COMPANY, KAWASAKI
CONTAINER LINE, P & O CONTAINERS, LTD., P & O KISEN KAISHAARIMURA SANGYO COMPANY, LTD.,
SWIRE CONTAINERS AND WILH WILHELMSEN LINE A/S, AMERICAN PRESIDENT LINES, LTD., MAERSK
REGIONAL CONTAINERS LINES (PTE), LTD., SENATOR FILIPINAS, INC., EASTERN SHIPPING LINES, INC.,
LINE BREMEN GERMANY, TOKYO NEDLLOYD LINES, INC., PHILIPPINE PRESIDENT LINES,
SENPAKU KAISHA, LTD., UNIGLORY LINE, WAN HAI LTD., SEA-LAND SERVICE, INC., MADRIGAL-WAN HAI
LINES, LTD., WESTWIND LINE, ZIM ISRAEL LINES, Petitioners,
NAVIGATION CO., LTD., COMPANIA SUD AMERICANA DE
VAPORES S.A., DEUTSCHE SEEREEDEREI ROSTOCK
- versus -
UNITED HARBOR PILOTS’

ASSOCIATION OF THE Promulgated:
PHILIPPINES, INC.,
Respondent. August 6, 2008 G.R. No. 172029
Present:
YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
x--------------------------------------------------x
DECISION
REYES, R.T., J.:
PAYMENT of nighttime and overtime differential of harbor pilots is the object of this petition for review on certiorari [1] of the Decision [2] of the
Court of Appeals (CA) partly setting aside the Order [3] of the Regional Trial Court (RTC), Branch 36, Manila pertaining to a motion for execution.
The Facts
On March 1, 1985, the Philippine Ports Authority (PPA) issued PPA Administrative Order (AO) No. 03-85 substantially adopting
the provisions of Customs Administrative Order (CAO) No. 15-65 [4] on the payment of additional charges for pilotage service [5] rendered
“between 1800H to 1600H,” or on “Sundays or Holidays,” practically referring to “nighttime and overtime pay.” Section 16 of the AO reads:
Section 16. Payment of Pilotage Service Fees. – Any vessel which employs a Harbor Pilot shall pay the pilotage fees prescribed in this
Order and shall comply with the following conditions:
xxxx
c) When pilotage service is rendered at any port between 1800H to 1600H, Sundays or Holidays, an additional charge of one hundred
(100%) percentum over the regular pilotage fees shall be paid by vessels engaged in foreign trade, and fifty (50%) percentum by coastwise vessels.
This additional charge or premium fee for nighttime pilotage service shall likewise be paid when the pilotage service is commenced before and
terminated after sunrise.
Provided, however, that no premium fee shall be considered for service rendered after 1800H if it shall be proven that the service can be
undertaken before such hours after the one (1) hour grace period, as provided in paragraph (d) of this section, has expired. (Emphasis supplied)
On February 3, 1986, responding to the clamor of harbor pilots for the increase and rationalization of pilotage service charges, then
President Ferdinand E. Marcos issued Executive Order (EO) No. 1088 providing for
uniform and modified rates for pilotage services rendered in all Philippine ports. It fixed the rate of pilotage fees on the basis of the
“vessel’s tonnage” and provided that the “rate for docking and undocking anchorage, conduction and shifting and other related special services is
equal to 100%.” EO No. 1088 also contained a repealing clause stating that all orders, letters of instruction, rules, regulations, and issuances
inconsistent with it are repealed or amended accordingly. [6]
Subsequently, pursuant to EO No. 1088, the PPA issued several resolutions disallowing overtime premium or charge and recalling its
recommendation for a reasonable night premium pay or night differential pay, viz.:
RESOLUTION NO. 14866[7]
RESOLVED, That on motion duly seconded, and in consideration of the proper court order(s) mandating PPA to implement the
pilotage rates under Executive Order No. 1088, the overtime premium or charge collected by Harbor Pilots is hereby disallowed
and Section 16(c) of Article III of PPA Administrative Order No. 03-85, prescribing general guidelines on pilotage services, be,
as it is hereby repealed and modified accordingly;
RESOLVED FURTHER, That the General Manager, be, as he is hereby authorized, to issue the corresponding amendatory
guidelines.
RESOLUTION NO. 1541 [8]
RESOLVED, That on motion duly seconded, and after taking into consideration the respective positions of the various Harbor
Pilot associations and shipping groups, Board Resolution No. 1486, be, as it is hereby reiterated and affirmed, and Management,
be, as it is hereby directed to adopt a policy of no overtime pay for pilotage services;
RESOLVED FURTHER, That in lieu of the “no overtime pay policy,” Management be, as it is hereby directed, to recommend a
reasonable night premium pay or night differential pay for the conduct of the basic pilotage services.”
RESOLUTION NO. 1554 [9]
RESOLVED, That on motion duly seconded, and taking into consideration the arguments raised by the Association of
International Shipping Lines, Inc., raising certain legal issues on the adoption of Resolution No. 1541, as adopted on November
13, 1995, the proposed PPA Administrative Order No. 19-95, hereto attached and incorporated by reference, recommending
amendments to Section 16(c) of PPA Administrative Order No. 03-85, disallowing overtime pay and authorizing instead the
collection of nighttime premium pay for pilotage services rendered during nighttime (1800H to 0600H), be, as it is hereby
deferred, for further legal review;
RESOLVED FURTHER, That pending review and clarification by the Office of the Government Corporate Counsel of the legal
issues on overtime pay/nighttime premium pay, Resolution No. 1541, be, as it is hereby recalled and Resolution No. 1486, as
adopted on May 19, 1995, be, as it is hereby reaffirmed.
On the strength of PPA Resolution No. 1486, petitioners Association of International Shipping Lines (AISL) and its members
refused to pay respondent United Harbor Pilots’ Association of the Philippines, Inc. (UHPAP)’s claims for nighttime and
overtime pay. [10] In response, UHPAP threatened to discontinue pilotage services should their claims be continually ignored.
[11]
Petitioners then filed a petition for declaratory relief with the RTC, Branch 36, Manila, docketed as Civil Case No. 96-
78400. The issues raised there were: (1) whether EO No. 1088 authorized the payment of nighttime and overtime pay; and (2)
whether the rate of pilotage fees enumerated in EO No. 1088 were for “every pilotage maneuver” or for the “entire package of
pilotage services.”
On January 26, 1998, the RTC granted the petition and declared that respondent UHPAP is not authorized to collect
any overtime or night shift differential for pilotage services rendered. The RTC disposed as follows:
WHEREFORE, judgment is hereby rendered granting the petition herein and it is hereby declared that (1) respondent PPA is
bereft of authority to impose and respondent UHPAP is not authorized to collect any overtime or night shift differential for
pilotage services rendered; and (2) the rates of fees for pilotage services rendered refer to the totality of pilotage services rendered
and respondent UHPAP cannot legally charge separate fees for each pilotage service rendered. All billings inconsistent with this
decision are declared null and void and petitioners are not liable therefor.
SO ORDERED. [12] (Emphasis supplied)
The trial court said that in view of the repealing clause in EO No. 1088, it was axiomatic that all prior issuances inconsistent with
it were deemed repealed. Thus, the provisions of Section 16 of PPA AO No. 03-85 on nighttime and overtime pay were
“effectively stricken-off the books.” It further held that since the rate of pilotage fees enumerated in EO No. 1088 was based on
the “vessel’s tonnage,” it meant that such rate referred to the “entire package of pilotage services.” According to the trial court,
to rule otherwise is to frustrate the uniformity envisioned by the rationalization scheme.
Respondent UHPAP moved for reconsideration but the motion was denied.
Desiring to secure for its members the payment of nighttime and overtime pay, respondent UHPAP filed directly before this
Court a petition for review on certiorari, docketed as G.R. No. 133763, raising the following legal issues for determination: (1)
whether EO No. 1088 repealed the provisions of CAO No. 15-65 and PPA AO No. 03-85, as amended, on payment of additional
pay for holidays work and premium pay for nighttime service; (2) whether the rates, as fixed in the schedule of fees based on
tonnage in EO No. 1088, are to be imposed on every pilotage movement; and (3) whether EO No. 1088 deprived the PPA of its
right, duty and obligation to promulgate new rules and rates for payment of fees, including additional pay for holidays and
premium pay for nighttime services.
On November 13, 2002, this Court granted the petition and reversed the RTC. This Court held then:
Section 3 of E.O. No. 1088 is a general repealing clause, the effect of which falls under the category of an implied repeal as it
does not identify the orders, rules or regulations it intends to abrogate. A repeal by implication is frowned upon in this
jurisdiction. It is not favored, unless it is manifest that the legislative authority so intended or unless it is convincingly and
unambiguously demonstrated that the subject laws or orders are clearly repugnant and patently inconsistent that they cannot co-
exist. This is because the legislative authority is presumed to know the existing law so that if repeal is intended, the proper step is
to express it.
6
There is nothing in E.O. No. 1088 that reveals any intention on the part of Former President Marcos to amend or supersede the
provisions of PPA AO No. 03-85 on nighttime and overtime pay. While it provides a general repealing clause, the same is made
dependent upon its actual inconsistency with other previous orders, rules, regulations or other issuance. Unfortunately for AISL,
we find no inconsistency between E.O. No. 1088 and the provisions of PPA AO No. 03-85. At this juncture, it bears pointing out
that these two orders dwell on entirely different subject matters. E.O. No. 1088 provides for uniform and modified rates for
pilotage services rendered to foreign and coastwise vessels in all Philippine ports, public or private. The purpose is to rationalize
and standardize the pilotage service charges nationwide. Upon the other hand, the subject matter of the controverted provisions
of PPA AO No. 03-85 is the payment of the additional charges of nighttime and overtime pay. Plainly, E.O. No. 1088 involves
the basic compensation for pilotage service while PPA AO No. 03-85 provides for the additional charges where pilotage service
is rendered under certain circumstances. Just as the various wage orders do not repeal the provisions of the Labor Code on
nighttime and overtime pay, the same principle holds true with respect to E.O. No. 1088 and PPA AO 03-85. Moreover, this
Court adheres to the rule that every statute must be so construed and harmonized with other statutes as to form a uniform system
of jurisprudence. E.O. No. 1088 and PPA AO No. 03-85 should thus be read together and harmonized to give effect to both.
xxxx
While E.O. No. 1088 prescribes the rates of pilotage fees on the basis of the “vessel’s tonnage,” however, this does not
necessarily mean that the said rate shall apply to the totality of pilotage services. If it were so, the benefit intended by E.O. No.
1088 to harbor pilots would be rendered useless and ineffectual. It would create an unjust if not an absurd situation of reducing
take home pay of the harbor pilots to a single fee, regardless of the number of services they rendered from the time a vessel
arrives up to its departure. It must be remembered that pilotage services cover a variety of maneuvers such as “docking,”
“undocking anchorage,” “conduction,” “shifting” and other “related special services.” To say that the rate prescribed by E.O. No.
1088 refers to the totality of all these maneuvers is to defeat the benefit intended by the law for harbor pilots. It should be
stressed that E.O. No. 1088 was enacted in response to the clamor of harbor pilots for the increase and rationalization of pilotage
service charges through the imposition of uniform and adjusted rates. Hence, in keeping with the benefit intended by E.O. No.
1088, the schedule of fees fixed therein based on tonnage should be interpreted as applicable to “each pilotage maneuver” and not
to the “totality of the pilotage services.”
The use of the word “and” between the words “docking” and “undocking” in paragraph 2 of Section 1 of E.O. No. 1088 should
not override the above-mentioned purpose of said law. It is a basic precept of statutory construction that statutes should be
construed not so much according to the letter that killeth but in line with the purpose for which they have been enacted. Statutes
are to be given such construction as will advance the object, suppress the mischief, and secure the benefits intended.
Furthermore, as can be gleaned from the drafts submitted by the PPA on the guidelines pertaining to the uniform pilotage
services to be rendered in all pilotage districts, the PPA is of the interpretation that the rate of pilotage fees fixed by E.O. No.
1088 is to be separately imposed on every pilotage maneuver done by the harbor pilots. This interpretation is likewise made clear
in PPA Memorandum Circular No. 42-98, dated October 8, 1998, which clarifies pilotage charges for docking and undocking, as
follows –
“To prevent disruption in pilotage service and considering the pendency of the final and executory decision of the Supreme Court
on the pilotage rates issue, it is hereby clarified that pilotage fees for docking and undocking of vessels shall be paid as two (2)
separate services x x x.”
The PPA is the proper government agency tasked with the duty of implementing E.O. No. 1088. As such, its interpretation of
said law carries great weight and consideration. In a catena of cases, we ruled that the construction given to a statute by an
administrative agency charged with the interpretation and application of a statute is entitled to great respect and should be
accorded great weight by the courts. The exception, which does not obtain in the present case, is when such construction is
clearly shown to be in sharp conflict with the governing statute or the Constitution and other laws. The rationale for this rule
relates not only to the emergence of the multifarious needs of a modern or modernizing society and the establishment of diverse
administrative agencies for addressing and satisfying those needs, it also relates to accumulation of experience and growth of
specialized capabilities by the administrative agency charged with implementing a particular statute.
The charges and fees provided for in E.O. No. 1088 are therefore to be imposed for every pilotage maneuver performed by the
harbor pilots, as properly interpreted by the PPA, the agency charged with its implementation.
xxxx
Finally, on the third issue, we rule that E.O. No. 1088 does not deprive the PPA of its power and authority to promulgate new
rules and rates for payment of fees, including additional charges. As we held in Philippine Interisland Shipping Association of
the Philippines v. Court of Appeals:
“The power of the PPA to fix pilotage rates and its authority to regulate pilotage still remain notwithstanding the fact that a
schedule for pilotage fees has already been prescribed by the questioned executive order (referring to E.O. No. 1088). PPA is at
liberty to fix new rates of pilotage subject only to the limitation that such new rates should not go below the rates fixed under
E.O. No. 1088. x x x.”
Our pronouncement is clearly in consonance with the provisions of Presidential Decree 857 which vests upon the PPA the power
and authority (1) “to supervise, control, regulate x x x such services as are necessary in the ports vested in, or belonging to the
Authority”; (2) “to control, regulate and supervise pilotage and the conduct of pilots in any Port District”; and (3) “to impose, fix,
prescribe, increase or decrease such rates, charges or fees x x x for the services rendered by it or by any private organization
within a Port District.” [13] (Emphasis supplied)
The decision became final and executory on February 14, 2003.
On April 8, 2003, respondent UHPAP filed a motion for the issuance of a writ of execution with the RTC. [14]
Petitioners opposed [15] the motion.
On September 25, 2003, the RTC issued an Order [16] denying respondent UHPAP’s motion and declaring that
“pursuant to the decision of the Supreme Court in G.R. No. 133763, PPA Resolution Nos. 1486, 1541, and 1554 are valid and
effective thereby disallowing the collection of overtime pay.” [17] The RTC explained:
x x x [W]hen the Supreme Court ruled and declared that Executive Order 1088 does not deprive the PPA of its power and
authority to promulgate rules and rates for payment of fees including additional charges, it had effectively ruled on the validity of
PPA resolutions 1486, 1541, and 1554. Said resolutions did not violate any provision of Executive Order 1088 and did not
constitute any diminution of the rates provided by said Executive Order. They merely repealed the collection of overtime
premiums or charges which is provided not by Executive Order 1088 but by another PPA Administrative Order 03-85. This is
not inconsistent with the ruling of the Supreme Court that Executive Order 1088 did not repeal the additional pay for holiday
work and premium pay for nighttime service, collectively referred to as overtime pay provided in Customs Administrative Order
No. 15-65 and PPA Administrative Order 03-85. The Supreme Court did not consider subsequent PPA resolutions or
administrative orders affecting overtime pay because this was not brought out as an issue.
Resolutions 1486, 1541, and 1554 have no effect on Executive Order 1088 whatsoever. [18] (Emphasis supplied)
Respondent UHPAP then filed a petition for certiorari [19] under Rule 65 with the CA, docketed as CA-G.R. SP No. 87892. It
contended that the RTC committed grave abuse of discretion amounting to lack of jurisdiction when it practically overturned the
final and executory decision of this Court in G.R. No. 133763 by declaring in its September 25, 2003 Order that PPA Resolution
Nos. 1486, 1541, and 1554 were valid and effective. [20]
CA Disposition
In a Decision dated October 19, 2005, the CA partly granted respondent’s petition in that it affirmed the denial of the
motion for the issuance of a writ of execution while, at the same time, deleting portions of the challenged Order. The decretal
portion of the CA Decision states:
IN VIEW OF ALL THE FOREGOING, the herein petition is hereby PARTLY GRANTED, in such a way that the denial of
UHPAP’s motion for the issuance of a writ of execution is AFFIRMED, while the declaration in the assailed Order of September
25, 2003 stating that “pursuant to the decision of the Supreme Court in G.R. No. 133763, PPA resolutions 1486, 1541, and 1554
are valid and effective thereby disallowing the collection of overtime pay,” is RECALLED and SET ASIDE and ordered
DELETED from the said Order. No pronouncement as to cost.
SO ORDERED. [21] (Emphasis supplied)
The CA set aside the declaration in the RTC Order dated September 25, 2003 that “pursuant to the decision of the Supreme Court
in G.R. No. 133763, PPA Resolution Nos. 1486, 1541, and 1554 are valid and effective thereby disallowing the collection of
overtime pay.” According to the CA, the RTC committed grave abuse of discretion as “it really not only modified but reversed a
final and executory decision of the highest court of the land.” [22] The appellate court ruled that when this Court, in G.R. No.
133763, declared ineffective the “pretended” repealing effect of EO No. 1088 on PPA AO No. 03-85, the subject PPA
Resolutions implementing Section 3 of EO No. 1088 were automatically rendered without any legal effect as well. [23] It also
ruled that since there was no inconsistency between EO No. 1088 and the provisions of PPA AO No. 03-85, the latter was
rendered in full legal force and effect. [24]
On November 10, 2005, petitioners filed a motion for partial reconsideration. [25] It contended that in resolving the
issue of whether EO No. 1088 repealed the provisions of CAO No. 15-65 and PPA AO No. 03-85 on nighttime and overtime pay,
this Court, in G.R. No. 133763, did not discuss the logical consequence of the resolution of the issue on PPA Resolution Nos.
1486, 1541, and 1554. [26] It further asserted that PPA Resolution Nos. 1486, 1541, and 1554 remain valid as they were issued
pursuant to PPA’s authority to regulate pilotage services. [27]
In a Resolution dated March 23, 2006, the CA denied petitioners’ motion for partial reconsideration. Hence, the present recourse.
Issue
Petitioners, via Rule 45, submit the lone assignment that THE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE
ERROR IN INTERPRETING AND CONCLUDING THAT THE RULING OF THE SUPREME COURT IN THE CASE OF
“THE UNITED HARBOR PILOTS’ ASSOCIATION OF THE PHILIPPINES, INC. V. ASSOCIATION OF THE
INTERNATIONAL SHIPPING LINES, INC., ET AL., G.R. 133763,” RENDERED “WITHOUT LEGAL EFFECT” THE PPA
RESOLUTION NOS. 1486, 1541, AND 1554 WHICH REPEALED OVERTIME AND NIGHTTIME PAY. [28]
Our Ruling
The petition lacks merit.
This Court’s ruling in G.R. No. 133763 that “EO No. 1088 did not repeal the provisions of PPA AO No. 03-85 on nighttime and
overtime pay,” necessarily rendered PPA Resolution Nos. 1486, 1541 and 1554 without any legal effect. Petitioners posit that
notwithstanding the declaration by this Court in G.R. No. 133763 that EO No. 1088 did not repeal the overtime and nighttime
pay provided under PPA AO 03-85, PPA Resolution Nos. 1486, 1541, and 1554 were not rendered “without legal effect.” They
insist that in resolving in G.R. No. 133763 the issue of whether EO No. 1088 repealed the provisions of PPA AO No. 03-85 on
nighttime and overtime pay, this Court did not discuss the logical consequence of the resolution of the issue on the subject PPA
Resolutions. [29]
We are not persuaded.
At the outset, it should be stressed that the PPA issued the subject resolutions – which disallowed overtime pay and recalled
PPA’s recommendation for nighttime pay to harbor pilots – pursuant to Section 3 of EO No. 1088 stating that “all orders, letters
of instruction, rules, regulations and issuances inconsistent with it are repealed or amended accordingly.” The PPA, just like
petitioners, [30] was of the belief that there was an actual inconsistency or an irreconcilable conflict between EO No. 1088 and
the provisions of PPA AO No. 03-85 on nighttime and overtime pay, resulting in the implied repeal of the latter. [31]
But, as this Court pronounced in G.R. No. 133763, there is nothing in EO No. 1088 that reveals any intention on the part of
Former President Marcos to amend or supersede the provisions of PPA AO No. 03-85 on nighttime and overtime pay. While
Section 3 of EO No. 1088 provides a general repealing clause, the same is made dependent upon its actual inconsistency with
other previous orders, rules, regulations or other issuance.
There is no inconsistency between EO No. 1088 and the provisions of PPA AO No. 03-85. These two orders dwell on entirely
different subject matters. EO No. 1088 provides for uniform and modified rates for pilotage services rendered to foreign and
coastwise vessels in all Philippine ports, public or private. On the other hand, the subject matter of the provisions of PPA AO
No. 03-85 is the payment of the additional charges of nighttime and overtime pay. Plainly, EO No. 1088 involves the basic
compensation for pilotage service while PPA AO No. 03-85 provides for the additional charges where pilotage service is
rendered under certain circumstances.
Obviously, this Court’s ruling in G.R. No. 133763 was that EO No. 1088 did not repeal the provisions of PPA AO No. 03-85 on
nighttime and overtime pay as there was no inconsistency between the two orders. The ruling rendered “without legal effect”
PPA Resolution Nos. 1486, 1541, and 1554, which were all issued by PPA pursuant to Section 3 of EO No. 1088. Upon the
other hand, the validity of the earlier PPA AO No. 03-85, which allowed nighttime and overtime pay to harbor pilots, was
affirmed.
It is noteworthy that when this Court, in G.R. No. 133763, reversed the RTC Decision dated January 26, 1998 (which declared,
among others, that in view of the repealing clause in EO No. 1088 respondent UHPAP is not authorized to collect any overtime
or night shift differential for pilotage services rendered), the Court likewise recognized the right of the members of respondent
UHPAP to overtime and nighttime pay under PPA AO No. 03-85. Indeed, a harbor pilot who has rendered nighttime and
overtime work must be paid nighttime and overtime pay.
Members of respondent UHPAP are entitled to nighttime and overtime pay. Undoubtedly, pursuant to PPA AO No. 03-85,
members of respondent UHPAP are legally entitled to nighttime and overtime pay.
It bears pointing out that additional compensation for nighttime work is founded on public policy. [32] Working at night is
violative of the law of nature for it is the period for rest and sleep. An employee who works at night has less stamina and vigor.
Thus, he can easily contract disease. The lack of sunlight tends to produce anemia and tuberculosis and predispose him to other
ills. Night work brings increased liability to eyestrain and accident. Serious moral dangers also are likely to result from the
necessity of traveling the street alone at night, and from the interference with normal home life. [33] Hygienic, medical, moral,
cultural and socio-biological reasons are in accord that night work has many inconveniences and when there is no alternative but
to perform it, it is but just that the laborer should earn greater salary than ordinary work so as to compensate the laborer to some
extent for the said inconveniences. [34]
Anent the payment of overtime pay, the Court explained its rationale in Philippine National Bank v. Philippine National Bank
Employees Association (PEMA): [35]
x x x Why is a laborer or employee who works beyond the regular hours of work entitled to extra compensation called in this
enlightened time, overtime pay? Verily, there can be no other reason than that he is made to work longer than what is
commensurate with his agreed compensation for the statutorily fixed or voluntarily agreed hours of labor he is supposed to do.
When he thus spends additional time to his work, the effect upon him is multi-faceted: he puts in more effort, physical and/or
mental; he is delayed in going home to his family to enjoy the comforts thereof; he might have no time for relaxation, amusement
or sports; he might miss important pre-arranged engagements; etc., etc. It is thus the additional work, labor or service employed
and the adverse effects just mentioned of his longer stay in his place of work that justify and is the real reason for the extra
compensation that he called overtime pay.
Overtime work is actually the lengthening of hours developed to the interests of the employer and the requirements of his
enterprise. It follows that the wage or salary to be received must likewise be increased, and more than that, a special additional
amount must be added to serve either as encouragement or inducement or to make up for the things he loses which we have
already referred to. And on this score, it must always be borne in mind that wage is indisputably intended as payment for work
done or services rendered.
Moreover, We agree with the CA that the RTC correctly denied respondent’s motion for execution. It will be recalled
that the original action before the RTC was one for declaratory relief filed by petitioners praying for:
(1) a construction of Executive Order No. 1088 declaring that AISLI is not liable to pay overtime and night shift
differential to respondent UHPAP; and
(2) a construction of Executive Order No. 1088 declaring that the schedule of rates provided therein applies to the entire
package of pilotage services under the compulsory pilotage scheme and that UHPAP cannot separately charge AISLI for each
pilotage service rendered. [37]
The disposition of the RTC in favor of petitioners in the declaratory relief petition was the decision elevated by the UHPAP to
this Court. Upon the reversal of the RTC decision by this Court, UHPAP went back to the RTC on a motion for execution.
Verily, that course of action on the part of UHPAP was procedurally infirm.
In such civil actions for declaratory relief under Rule 63 of the Rules of Court, the judgment does not entail an executory
process, as the primary objective of petitioner is to determine any question of construction or validity and for a declaration of
concomitant rights and duties. [39] The proper remedy would have been for members of respondent UHPAP to claim for
overnight and nighttime pay before petitioners AISLI and its members.
WHEREFORE, the petition is DENIED and the appealed Decision AFFIRMED. Costs against petitioners.
SO ORDERED
SECOND DIVISION
OROPORT CARGOHANDLING SERVICES, INC., G.R. No. 166785

represented by its President FRANKLIN U. SIAO,
Petitioner, Present:
QUISUMBING, J., Chairperson,

- versus - CARPIO MORALES,
TINGA,
VELASCO, JR., and
BRION, JJ.
PHIVIDEC INDUSTRIAL AUTHORITY,

Respondent. Promulgated:
July 28, 2008

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
QUISUMBING, J.:
Can Phividec [1] Industrial Authority (PIA) temporarily operate as a seaport cargo-handler upon agreement with the Philippine Ports
Authority (PPA) [2] sans a franchise or a license from Congress or PPA?
Petitioner Oroport Cargohandling Services, Inc. (Oroport) impugns in this petition for review on certiorari the Decision [3] dated January 5,
2005 of the Court of Appeals in CA-G.R. SP No. 84147 annulling the orders [4] of the Regional Trial Court (RTC) of Cagayan de Oro City, Branch
39 which enjoined the cargo-handling operations of respondent PIA at the Mindanao Container Terminal (MCT).
Oroport is a cargo-handling contractor [5] at the Cagayan de Oro International Port (CDOIP) while PIA is a Phividec subsidiary created to
uplift the socio-economic condition of war veterans, military retirees and their children by allowing them to participate in its development
undertakings as employees, developers and business partners with the mission to establish, develop and professionally administer industrial areas,
ports and utilities. [6]
In 2003, Oroport bid for the management and operation of MCT, a P3.24 billion government infrastructure project at Phividec Industrial
Estate in Tagoloan, Misamis Oriental. MCT was funded by a loan contracted by the Philippine government with the Japan Bank for International
Cooperation (JBIC). [7] It was later renamed Mindanao Container Terminal Sub-Port and placed under the jurisdiction of the Bureau of Customs as
a sub-port entry. [8]
As no bidder won in the two public biddings, PIA took over MCT operations.
On April 19, 2004, Oroport sued PIA and Phividec in the RTC for injunction and damages. It accused PIA of illegally operating MCT
without a license from PPA or a franchise from Congress. It also alleged unfair competition since PIA handled cargoes of the general public. It
further invoked unlawful deprivation of property as it stands to incur investment losses with PIA’s take over of MCT operations. It contended that
PIA’s operation of MCT will cause it damage and irreparable injury as PIA would eventually siphon the cargo traffic of CDOIP to MCT. It prayed
that PIA be stopped from handling cargoes not owned or consigned to its industrial estate locators. [9]
During the hearings for its application for preliminary injunction, Oroport claimed that PIA’s operation of MCT is highly adverse to the
country since it does not have experience in seaport cargo-handling. It contended that since the core business of PIA and Phividec is the
establishment and operation of industrial estates, their authority to build and operate ports should be construed merely as a complement of their
primary function. Thus, the ports they built should accommodate only cargoes owned or consigned to its industrial estate locators or else it can build
ports and handle cargoes anywhere, directly competing with PPA.
PIA and Phividec invoked Republic Act No. 8975 [10] which prohibits lower courts from issuing temporary restraining orders or
preliminary injunctions on government infrastructure projects especially where an injunction in this case would mean wasting P3.24 billion resulting
in a loan default. They highlighted the fact that PIA’s operation of MCT is endorsed by the government and by various groups. [11] They added that
preventing PIA from operating MCT will aggravate the huge financial deficit of the national government and contribute to the collapse of the
economy.
On April 27, 2004, the RTC enjoined PIA and Phividec from handling cargoes not owned or consigned to its industrial estate locators. [12]
PIA sought to reverse the order and dismiss the complaint which Oroport opposed.
On May 11, 2004, the RTC issued the two orders, thus:
WHEREFORE, in view of the foregoing and for lack of merit, the Motion for Reconsideration filed by defendants of the Order of this
Court dated April 27, 2004 … with Urgent Motion for the Dismissal of the instant complaint, is hereby DENIED.
SO ORDERED. [13]
...
WHEREFORE, in view of the foregoing, the injunctive writ prayed for by plaintiff is hereby GRANTED for being meritorious.
Accordingly, defendants PHILIPPINE VETERANS INVESTMENT DEVELOPMENT CORP. (PHIVIDEC) and PHIVIDEC INDUSTRIAL
AUTHORITY (PIA), and any or all persons acting for and in its behalf, [are] hereby ordered to CEASE and DESIST from engaging in cargo
handling operations of cargoes at the Mindanao Container Terminal which are not owned or consigned to locators inside the Phividec Industrial
Estate, until further orders from this Court.
To answer for whatever damages that defendants may sustain by reason of this preliminary injunction, if the Court should finally decide
that plaintiff is not entitled thereto, plaintiff is hereby ordered to put up a bond of TWO MILLION (2,000,000.00) PESOS.
SO ORDERED. [14]
The RTC ruled that Rep. Act No. 8975 is inapplicable as Oroport does not seek to restrain the operation of MCT but that it must be
operated legally since PIA’s right to operate is limited to cargoes owned or consigned to its industrial estate locators. The RTC emphasized that
before PIA could operate as a public utility, it should be properly authorized by PPA since cargo-handling is a regulated activity. In imposing low
tariff rates and accepting third-party cargoes, PIA unlawfully deprived Oroport of its property. [15] The RTC explained that the act sought to be
enjoined will cause Oroport prejudice and serious damage as the existing cargo-handling operations at the CDOIP will be adversely affected if PIA is
allowed to operate MCT. [16]
On May 18, 2004, PIA sought to dismiss the complaint and filed a P30 million-counterclaim. [17] On May 28, 2004, PIA moved to lift and
dissolve the preliminary injunction due to the alleged defective and invalid plaintiff’s bond and insufficiency of the P2 million bond to cover for its
projected damage. [18] Oroport opposed. [19] The RTC upheld the opposition. [20]
On June 1, 2004, PIA filed with the Court of Appeals a Petition for Certiorari and Prohibition [21] invoking Section 3 [22] of
Rep. Act No. 8975, arguing that the RTC had no jurisdiction to issue writs of preliminary injunction against operations of government infrastructure
projects. Assuming it had, it issued the writ without hearing and Oroport was not entitled thereto. It prayed ex parte for a TRO. [23] Oroport
countered that Rep. Act No. 8975 exempts urgent constitutional issues from the prohibition to issue injunctive relief. [24]
On January 5, 2005, the Court of Appeals annulled the subject orders, ruling that the RTC committed grave abuse of discretion in
issuing them. Hence, this petition, raising two issues:
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS HAD ERRED IN RULING THAT THE REGIONAL TRIAL
COURT, BRANCH 39, HAD NO JURISDICTION TO ISSUE THE TWO (2) ORDERS OF MAY 11, 2004; AND
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS HAD ERRED IN GRANTING THE RELIEF IN FAVOR OF PIA
DESPITE THE FACT THAT IT HAD NOT SHOWN ANY CLEAR RIGHT TO THE RELIEF PRAYED FOR. [25]
Simply, the issues are: (1) Did the Court of Appeals err in ruling that the RTC had no jurisdiction to issue the writ of preliminary
injunction? and (2) Can PIA temporarily operate as a seaport cargo-handler upon agreement with PPA sans a franchise or a license?
Oroport contends that PIA’s operation of MCT is illegal as it has no license or franchise to operate as a public utility. It also constitutes
unfair competition because PIA offered lower tariff rates than those recommended at the failed public biddings, prejudicing the loan agreement with
JBIC to the disadvantage of the taxpayers. PIA likewise engaged a third-party in hiring stevedores, which is prohibited under PPA rules and
regulations. Oroport also argues that PIA’s operation of MCT constitutes unlawful deprivation of property due to potential investment losses in
modernizing CDOIP as required by its two-year probationary contract with PPA. It contends that the appellate court erred in reversing the RTC’s
finding of fact which is a mere error of judgment, not an error of jurisdiction, and which is reviewable by ordinary appeal and not by certiorari as it is
not necessarily equivalent to grave abuse of discretion. Oroport stresses that the appellate court did not categorically rule that the RTC acted without
or in excess of jurisdiction or with grave abuse of discretion.
PIA counters that it does not need a license from PPA to be a port operator or cargo-handler due to their Memoranda of Agreement (MOA)
dated October 20, 1980 and October 16, 1995, which provide as follows:
xxxx
5. CARGO-HANDLING SERVICES. – All cargo handling services on and off vessel shall be under the control,
regulation and supervision of the PIA as well as rates and charges in connection therewith using as basis the PPA approved rates in Macabalan
Wharf, Cagayan de Oro City or in private ports as the case may be but in no case shall said charges be higher than the rates prescribed by PPA.
(MOA dated October 20, 1980).
xxxx
4. CARGO-HANDLING SERVICES. – All cargo handling services, on and off vessel shall be under the control,
regulation and supervision of the PIA as well as the rates and charges in connection therewith using as basis the rates prescribed by PPA.
([Amended] MOA dated October 16, 1995. …) [26]
It claims that it operated MCT after the failed public biddings since the loan agreement with JBIC specified non-operation of
MCT as a cause for default that will render the entire loan due and demandable. PIA argues that the RTC had no jurisdiction to issue a writ of
preliminary injunction against the operation of MCT considering that such power and authority resides exclusively with this Court. Hence, the act of
the RTC must be corrected by certiorari considering that it is an error of jurisdiction, not a mere error of judgment. It also argues that the MOA and
its amendment embody PPA’s concurrence with the exercise of PIA’s power and authority to operate ports inside its estate that would cater to any
client. PIA swears that its operation of MCT is only temporary to prevent being declared in default by JBIC. [27]
After painstakingly weighing the pros and cons presented in the records and the parties’ memoranda, we deny the petition.
First. A preliminary injunction is an order granted at any stage of an action prior to the judgment or final order, requiring a party, court,
agency or person to refrain from a particular act or acts. [28] A preservative remedy, its issuance lies upon the existence of a claimed emergency or
extraordinary situation which should be avoided; otherwise, the outcome of litigation would be useless as far as the party applying for the writ is
concerned. There must be a clear and material right to be protected and that the facts against which the injunction is to be directed violate said right.
In annulling the subject orders, the Court of Appeals explained that while Section 3 of Rep. Act No. 8975 exempts urgent constitutional
issues from the prohibition to issue injunctive relief, it does not follow that a claim of unlawful deprivation of property involves such an issue in the
same manner that a robbery victim unlawfully deprived of property cannot claim that his case involves a constitutional issue. It reasoned that Rep.
Act No. 8975 is clear that it is not within the RTC’s jurisdiction to issue an injunctive writ against the operation of a government infrastructure
project. Since Oroport failed to specify what property was robbed of it, the appellate court ruled that PIA does not need a license from PPA to
operate because the MOA [29] and its amendment granted PIA exclusive control and supervision of MCT on all cargo-handling services, including
the discretion to impose rates and charges not higher than those PPA-prescribed.
Rep. Act No. 8975 reserves the power to issue injunctive writs on government infrastructure projects exclusively with this Court and the
RTC cannot issue an injunctive writ to stop the cargo-handling operations at MCT. The issues presented by Oroport can hardly be considered
constitutional, much more constitutional issues of extreme urgency. Hence, the appellate court did not err in annulling the writ of preliminary
injunction and in ruling that the RTC had no jurisdiction to enjoin the operation of this multi-billion government infrastructure project.
Second. PPA was created for the purpose of, among others, promoting the growth of regional port bodies. In furtherance of this objective,
PPA is empowered, after consultation with relevant government agencies, to make port regulations particularly to make rules or regulation for the
planning, development, construction, maintenance, control, supervision and management of any port or port district in the country. With this
mandate, the decision to bid out cargo-handling services is within the province and discretion of PPA which necessarily required prior study and
evaluation. This task is best left to the judgment of PPA and cannot be set aside absent grave abuse of discretion on its part. [30] As long as the
standards are set in determining the contractor and such standards are reasonable and related to the purpose for which they are used, courts should not
inquire into the wisdom of PPA’s choice. [31] In Philippine Ports Authority v. Court of Appeals [32] where PPA hired rival contractors to operate in
a major port, we held:
Entering into a contract for the operation of a floating grains terminal, notwithstanding the existence of other stevedoring contracts
pertaining to the South Harbor, is undoubtedly an exercise of discretion on the part of the PPA. The exercise of such discretion is a policy decision
that necessitates such procedures as prior inquiry, investigation, comparison, evaluation and deliberation. No other persons or agencies are in a better
position to gauge the need for the floating grains terminal than the PPA; certainly, not the courts. [33]
Since PPA has given PIA the right to manage and operate MCT, we cannot simply abrogate it.
PIA properly took over MCT operations sans a franchise or license as it was necessary, temporary and beneficial to the public. We have
ruled that franchises from Congress are not required before each and every public utility may operate because the law has granted certain
administrative agencies the power to grant licenses for or to authorize the operation of certain public utilities. Article XII, Section 11 [34] of the
Constitution does not necessarily imply that only Congress can grant such authorization. The determination of whether the winning bidder is
qualified to undertake the contracted service should be left to the sound judgment of PPA or PIA as these agencies are in the best position to evaluate
the feasibility of the projections of the bidders and to decide which bid is compatible with the project’s development plans. Neither the Court nor
Congress has the time and the technical know-how to look into this matter. [35] Furthermore, Section 4(e) of Presidential Decree No. 538, gives PIA
the legal authority to construct, operate and maintain port facilities including stevedoring and port terminal services even without PPA’s authority.
The MOA granting PIA the exclusive control and supervision of all ports, wharves, piers and services within the industrial area, recognizing its
power to collect port fees, dues and charges, makes PIA’s authority over MCT operations more secure.
After the two public biddings failed, PIA was left with no other option but to take over MCT operations so that it could earn, pending the
award to a qualified bidder, some amount to pay the loan to JBIC and to avoid being declared in default. During the September 27, 2004 hearing
before the Court of Appeals-Mindanao, Atty. Raul Ragandang of PIA stressed that decision when Justice Punzalan-Castillo asked him if Phividec
will permanently engage in cargo-handling services by citing failure of bidding as excuse. Atty. Ragandang replied that Phividec will not
permanently engage in cargo-handling considering that it has no capacity to operate MCT:
xxxx
ATTY. RAGANDANG:
… [Phividec] was just forced to operate temporarily considering that the port will be left unused and the Japanese requires that non-usage
of the port is a violation of the loan agreement. In fact, the representative of the Japan Bank for International Cooperation talked to the PIA
administrator and the Secretary of Finance advising the two . . . that the non-operation of the port is a violation of the loan agreement, which will
result, according to the JBIC, in non-extension of other loans, pending before the JBIC. So it will greatly hamper the government infrastructural
projects considering that the government now has no money to sustain these infrastructure projects and JBIC extends a loan of 40 years to pay and
less than 1% of interest in the repayment of 10 years, Your Honor. So, you just imagine the magnitude of the deprivation of the government or its
infrastructure projects because of the non-operation of this port. JBIC will declare that [it] has violated the loan agreement and the subsequent,
finding of other government projects will no longer be entertained. [36]
Notably, Oroport is estopped from questioning PIA’s authority because it participated in the two public biddings. As a cargo-handling
contractor at the CDOIP, it is not a real party-in-interest in this case as only PPA may protest PIA’s operation of MCT. As Oroport admitted, PPA is
amenable to PIA’s operation of MCT as they entered into an exclusive agreement. Even assuming that Oroport is a real party-in-interest, it is not
entitled to an injunction as the alleged damage or threat of damage is speculative and factually baseless. Cargo-handling in a different, though
adjacent, port will not necessarily result in revenue loss since CDOIP is already congested.
Moreover, Oroport failed to convince us that it has a clear and actual right to be enforced and protected. Oroport has no right to manage
MCT since it has no contractual relations with PIA, Phividec or PPA. It has no statutory grant of authority. Clearly, it has no right in esse to be
protected by an injunctive writ. [37] Even if Oroport won the public bidding and obtained an exclusive contract for port operations at MCT, it has no
vested right to operate MCT because contract clauses are not inflexible barriers to public regulations. [38] Business permits may be terminated by
authorities any time based on policy guidelines and statutes because what is given is not a property right but a mere privilege. [39] In fact, the right
of PPA or its anointed government agencies like PIA to take over port facilities from operators whose contracts have expired is indubitable. [40] The
law authorizing PPA to take over arrastre and stevedoring services in government-owned ports and cancel permits issued to private operators is a
valid exercise of police power; it does not violate due process of law as the exercise of police power is paramount over the right against non-
impairment of contracts. Moreover, a regulated monopoly is not proscribed in industries affected with public interest such as in port rendition of
arrastre/stevedoring services in Philippine ports. [41]
Oroport’s allegation of unfair competition also fails because private monopolies are not necessarily prohibited by the Constitution. Certain
public utilities must be given franchises for public interest and these franchises do not violate the law against monopolies. [42] PIA’s policy decision
to handle the cargo operation itself enjoys presumption of regularity as it did not violate any relevant law, rules, regulations, ordinance or issuances in
so doing. Even so, there is no unfair competition as PIA (1) is not a competitor of Oroport; (2) imposes the same tariff rates as Oroport; and (3) is
operating in an entirely separate and distinct port. As PIA argues, the public deserves alternative and better facilities. MCT is not exclusive to the
industrial estate locators as the feasibility study of MCT prepared by PIA and approved by the National Economic Development Authority
emphasized that MCT will cater not only to locator firms but also to outside clients and prospective users. Addressing CDOIP congestion, MCT is
beneficial to shipping lines and the general public.
WHEREFORE, the petition is DENIED and the assailed Decision dated January 5, 2005 of the Court of Appeals in CA-G.R. SP No. 84147
is hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
THIRD DIVISION
x---------------------------- ---------------------x
CHICO-NAZARIO, J.:
PHILIPPINE AIRLINES, INC.,
Petitioner,
- versus -
HON. ADRIANO SAVILLO, Presiding Judge of RTC Branch 30 , Iloilo City, and SIMPLICIO GRIÑO,
Respondents. G.R. No. 149547
Present:
YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
Promulgated:
July 4, 2008
DECISION
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the Decision [1] dated 17 August 2001, rendered by the
Court of Appeals in CA-G.R. SP No. 48664, affirming in toto the Order [2] dated 9 June 1998, of Branch 30 of the Regional Trial Court (RTC)
of Iloilo City, dismissing the Motion to Dismiss filed by petitioner Philippine Airlines Inc. (PAL) in the case entitled, Simplicio Griño v.
Philippine Airlines, Inc. and Singapore Airlines, docketed as Civil Case No. 23773.
PAL is a corporation duly organized under Philippine law, engaged in the business of providing air carriage for passengers, baggage and cargo. [3]
Public respondent Hon. Adriano Savillo is the presiding judge of Branch 30 of the Iloilo RTC, where Civil Case No. 23773 was filed; while private
respondent Simplicio Griño is the plaintiff in the aforementioned case.
The facts are undisputed.
Private respondent was invited to participate in the 1993 ASEAN Seniors Annual Golf Tournament held in Jakarta, Indonesia. He and several
companions decided to purchase their respective passenger tickets from PAL with the following points of passage: MANILA-SINGAPORE-
JAKARTA-SINGAPORE-MANILA. Private respondent and his companions were made to understand by PAL that its plane would take them
from Manila to Singapore, while Singapore Airlines would take them from Singapore to Jakarta. [4]
On 3 October 1993, private respondent and his companions took the PAL flight to Singapore and arrived at about 6:00 o’clock in the evening. Upon
their arrival, they proceeded to the Singapore Airlines office to check-in for their flight to Jakarta scheduled at 8:00 o’clock in the same
evening. Singapore Airlines rejected the tickets of private respondent and his group because they were not endorsed by PAL. It was explained
to private respondent and his group that if Singapore Airlines honored the tickets without PAL’s endorsement, PAL would not pay Singapore
Airlines for their passage. Private respondent tried to contact PAL’s office at the airport, only to find out that it was closed. [5]
Stranded at the airport in Singapore and left with no recourse, private respondent was in panic and at a loss where to go; and was subjected to
humiliation, embarrassment, mental anguish, serious anxiety, fear and distress. Eventually, private respondent and his companions were forced
to purchase tickets from Garuda Airlines and board its last flight bound for Jakarta. When they arrived in Jakarta at about 12:00 o’clock
midnight, the party who was supposed to fetch them from the airport had already left and they had to arrange for their transportation to the
hotel at a very late hour. After the series of nerve-wracking experiences, private respondent became ill and was unable to participate in the
tournament. [6]
Upon his return to the Philippines, private respondent brought the matter to the attention of PAL. He sent a demand letter to PAL on 20 December
1993 and another to Singapore Airlines on 21 March 1994. However, both airlines disowned liability and blamed each other for the fiasco. On
15 August 1997, private respondent filed a Complaint for Damages before the RTC docketed as Civil Case No. 23773, seeking compensation
for moral damages in the amount of P1,000,000.00 and attorney’s fees. [7]
Instead of filing an answer to private respondent’s Complaint, PAL filed a Motion to Dismiss [8] dated 18 September 1998 on the ground that the
said complaint was barred on the ground of prescription under Section 1(f) of Rule 16 of the Rules of Court. [9] PAL argued that the Warsaw
Convention, [10] particularly Article 29 thereof, [11] governed this case, as it provides that any claim for damages in connection with the
international transportation of persons is subject to the prescription period of two years. Since the Complaint was filed on 15 August 1997,
more than three years after PAL received the demand letter on 25 January 1994, it was already barred by prescription.
On 9 June 1998, the RTC issued an Order [12] denying the Motion to Dismiss. It maintained that the provisions of the Civil Code and other pertinent
laws of the Philippines, not the Warsaw Convention, were applicable to the present case.
The Court of Appeals, in its assailed Decision dated 17 August 2001, likewise dismissed the Petition for Certiorari filed by PAL and affirmed the 9
June 1998 Order of the RTC. It pronounced that the application of the Warsaw Convention must not be construed to preclude the application
of the Civil Code and other pertinent laws. By applying Article 1144 of the Civil Code, [13] which allowed for a ten-year prescription period,
the appellate court declared that the Complaint filed by private respondent should not be dismissed. [14]
Hence, the present Petition, in which petitioner raises the following issues:
THE COURT OF APPEALS ERRED IN NOT GIVING DUE COURSE TO THE PETITION AS RESPONDENT JUDGE COMMITED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OF JURSIDICTION IN DENYING PAL’S MOTION TO DISMISS.
II
THE COURT OF APPEALS ERRED IN NOT APPLYING THE PROVISIONS OF THE WARSAW CONVENTION DESPITE THE FACT THAT
GRIÑO’S CAUSE OF ACTION AROSE FROM A BREACH OF CONTRACT FOR INTERNATIONAL AIR TRANSPORT.
III
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE COMPLAINT FILED BY GRIÑO BEYOND THE TWO (2)-YEAR
PERIOD PROVIDED UNDER THE WARSAW CONVENTION IS ALREADY BARRED BY PRESCRIPTION. [15]
The petition is without merit.
In determining whether PAL’s Motion to Dismiss should have been granted by the trial court, it must be ascertained if all the claims made by the
private respondent in his Complaint are covered by the Warsaw Convention, which effectively bars all claims made outside the two-year
prescription period provided under Article 29 thereof. If the Warsaw Convention covers all of private respondent’s claims, then Civil Case No.
23773 has already prescribed and should therefore be dismissed. On the other hand, if some, if not all, of respondent’s claims are outside the
coverage of the Warsaw Convention, the RTC may still proceed to hear the case.
transportation of persons, baggage or goods performed by any aircraft for hire.” It seeks to accommodate or balance the interests of passengers
seeking recovery for personal injuries and the interests of air carriers seeking to limit potential liability. It employs a scheme of strict liability
favoring passengers and imposing damage caps to benefit air carriers. [16] The cardinal purpose of the Warsaw Convention is to provide
uniformity of rules governing claims arising from international air travel; thus, it precludes a passenger from maintaining an action for personal
injury damages under local law when his or her claim does not satisfy the conditions of liability under the Convention. [17]
Article 19 of the Warsaw Convention provides for liability on the part of a carrier for “damages occasioned by delay in the transportation by air of
passengers, baggage or goods.” Article 24 excludes other remedies by further providing that “(1) in the cases covered by articles 18 and 19,
any action for damages, however founded, can only be brought subject to the conditions and limits set out in this convention.” Therefore, a
claim covered by the Warsaw Convention can no longer be recovered under local law, if the statute of limitations of two years has already
lapsed.
Nevertheless, this Court notes that jurisprudence in the Philippines and the United States also recognizes that the Warsaw Convention does not
“exclusively regulate” the relationship between passenger and carrier on an international flight. This Court finds that the present case is
substantially similar to cases in which the damages sought were considered to be outside the coverage of the Warsaw Convention.
In United Airlines v. Uy, [18] this Court distinguished between the (1) damage to the passenger’s baggage and (2) humiliation he suffered at the
hands of the airline’s employees. The first cause of action was covered by the Warsaw Convention which prescribes in two years, while the
second was covered by the provisions of the Civil Code on torts, which prescribes in four years.
Similar distinctions were made in American jurisprudence. In Mahaney v. Air France, [19] a passenger was denied access to an airline flight
between New York and Mexico, despite the fact that she held a confirmed reservation. The court therein ruled that if the plaintiff were to claim
damages based solely on the delay she experienced – for instance, the costs of renting a van, which she had to arrange on her own as a
consequence of the delay – the complaint would be barred by the two-year statute of limitations. However, where the plaintiff alleged that the
airlines subjected her to unjust discrimination or undue or unreasonable preference or disadvantage, an act punishable under the United States
laws, then the plaintiff may claim purely nominal compensatory damages for humiliation and hurt feelings, which are not provided for by the
Warsaw Convention. In another case, Wolgel v. Mexicana Airlines, [20] the court pronounced that actions for damages for the “bumping off”
itself, rather than the incidental damages due to the delay, fall outside the Warsaw Convention and do not prescribe in two years.
In the Petition at bar, private respondent’s Complaint alleged that both PAL and Singapore Airlines were guilty of gross negligence, which resulted in
his being subjected to “humiliation, embarrassment, mental anguish, serious anxiety, fear and distress.” [21] The emotional harm suffered by
the private respondent as a result of having been unreasonably and unjustly prevented from boarding the plane should be distinguished from the
actual damages which resulted from the same incident. Under the Civil Code provisions on tort, [22] such emotional harm gives rise to
compensation where gross negligence or malice is proven.
The instant case is comparable to the case of Lathigra v. British Airways. [23]
In Lathigra, it was held that the airlines’ negligent act of reconfirming the passenger’s reservation days before departure and failing to inform the
latter that the flight had already been discontinued is not among the acts covered by the Warsaw Convention, since the alleged negligence did
not occur during the performance of the contract of carriage but, rather, days before the scheduled flight.
In the case at hand, Singapore Airlines barred private respondent from boarding the Singapore Airlines flight because PAL allegedly failed to endorse
the tickets of private respondent and his companions, despite PAL’s assurances to respondent that Singapore Airlines had already confirmed
their passage. While this fact still needs to be heard and established by adequate proof before the RTC, an action based on these allegations
will not fall under the Warsaw Convention, since the purported negligence on the part of PAL did not occur during the performance of the
contract of carriage but days before the scheduled flight. Thus, the present action cannot be dismissed based on the statute of limitations
provided under Article 29 of the Warsaw Convention.
Had the present case merely consisted of claims incidental to the airlines’ delay in transporting their passengers, the private respondent’s Complaint
would have been time-barred under Article 29 of the Warsaw Convention. However, the present case involves a special species of injury
resulting from the failure of PAL and/or Singapore Airlines to transport private respondent from Singapore to Jakarta – the profound distress,
fear, anxiety and humiliation that private respondent experienced when, despite PAL’s earlier assurance that Singapore Airlines confirmed his
passage, he was prevented from boarding the plane and he faced the daunting possibility that he would be stranded in Singapore Airport
because the PAL office was already closed.
These claims are covered by the Civil Code provisions on tort, and not within the purview of the Warsaw Convention. Hence, the applicable
prescription period is that provided under Article 1146 of the Civil Code:
Art. 1146. The following actions must be instituted within four years:
(1) Upon an injury to the rights of the plaintiff;
(2) Upon a quasi-delict.
Private respondent’s Complaint was filed with the RTC on 15 August 1997, which was less than four years since PAL received his extrajudicial
demand on 25 January 1994. Thus, private respondent’s claims have not yet prescribed and PAL’s Motion to Dismiss must be denied.
Moreover, should there be any doubt as to the prescription of private respondent’s Complaint, the more prudent action is for the RTC to continue
hearing the same and deny the Motion to Dismiss. Where it cannot be determined with certainty whether the action has already prescribed or
not, the defense of prescription cannot be sustained on a mere motion to dismiss based on what appears to be on the face of the complaint. [24]
And where the ground on which prescription is based does not appear to be indubitable, the court may do well to defer action on the motion to
dismiss until after trial on the merits. [25]
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 48664,
promulgated on 17 August 2001 is AFFIRMED. Costs against the petitioner.
SO ORDERED.
SECOND DIVISION
JUANITO TALIDANO, G.R. No. 172031

Petitioner,
Present:
QUISUMBING, J.,
Chairperson,
- versus - CARPIO MORALES,
TINGA,
VELASCO, JR., and
BRION, JJ.
FALCON MARITIME & ALLIED
SERVICES, INC., SPECIAL EIGHTH
DIVISION OF THE COURT OF Promulgated:
APPEALS, AND LABOR ARBITER
ERMITA C. CUYUGA,
Respondents. July 14, 2008
x----------------------------------------------------------------------------x
DECISION
TINGA, J.:
This Petition for Certiorari [1] under Rule 65 of the Rules of Court seeks to annul the Decision [2] and Resolution [3] of the Court of Appeals, dated
16 November 2005 and 2 February 2006, respectively, which upheld the validity of the dismissal of Juanito Talidano
(petitioner). The challenged decision reversed and set aside the Decision [4] of the National Labor Relations Commission
(NLRC) and reinstated that of the Labor Arbiter. [5]
Petitioner was employed as a second marine officer by Falcon Maritime and Allied Services, Inc. (private respondent) and was assigned to M/V
Phoenix Seven, a vessel owned and operated by Hansu Corporation (Hansu) which is based in Korea. His one (1)-year
contract of employment commenced on 15 October 1996 and stipulated the monthly wage at $900.00 with a fixed overtime pay
of $270.00 and leave pay of $75.00. [6]
Petitioner claimed that his chief officer, a Korean, always discriminated against and maltreated the vessel’s Filipino crew. This prompted him to
send a letter-complaint to the officer-in-charge of the International Transport Federation (ITF) in London, a measure that
allegedly was resented by the chief officer. Consequently, petitioner was dismissed on 21 January 1997. He filed a complaint
for illegal dismissal on 27 October 1999. [7]
Private respondent countered that petitioner had voluntarily disembarked the vessel after having been warned several times of dismissal from service
for his incompetence, insubordination, disrespect and insulting attitude toward his superiors. It cited an incident involving
petitioner’s incompetence wherein the vessel invaded a different route at the Osaka Port in Japan due to the absence of
petitioner who was then supposed to be on watch duty. As proof, it presented a copy of a fax message, sent to it on the date of
incident, reporting the vessel’s deviation from its course due to petitioner’s neglect of duty at the bridge, [8] as well as a copy
of the report of crew discharge issued by the master of M/V Phoenix Seven two days after the incident. [9]
Private respondent stated that since petitioner lodged the complaint before the Labor Arbiter two (2) years and nine (9) months after his repatriation,
prescription had already set in by virtue of Revised POEA Memorandum Circular No. 55, series of 1996 which provides for a
one-year prescriptive period for the institution of seafarers’ claims arising from employment contract. [10]
On 5 November 2001, the Labor Arbiter rendered judgment dismissing petitioner’s complaint, holding that he was validly dismissed for gross neglect
of duties. The Labor Arbiter relied on the fax messages presented by private respondent to prove petitioner’s neglect of his
duties, thus:
x x x The fax message said that the Master of M/V Phoenix Seven received an emergency warning call from Japan Sisan Sebo Naika Radio
Authority calling attention to the Master of the vessel M/V Phoenix Seven that his vessel is invading other route [sic]. When
the Master checked the Bridge, he found out that the Second Officer (complainant) did not carry out his duty wathch. There
was a confrontation between the Master and the Complainant but the latter insisted that he was right. The argument of the
Complainant asserting that he was right cannot be sustained by this Arbitration Branch. The fact that there was an emergency
call from the Japanese port authority that M/V Phoenix Seven was invading other route simply means that Complainant
neglected his duty. The fax message stating that Complainant was not at the bridge at the time of the emergency call was
likewise not denied nor refuted by the Complainant. Under our jurisprudence, any material allegation and/or document which
is not denied specifically is deemed admitted. If not of the timely call [sic] from the port authority that M/V Phoenix Seven
invaded other route, the safety of the vessel, her crew and cargo may be endangered. She could have collided with other
vessels because of complainant’s failure to render watch duty. [11]
On appeal, the NLRC reversed the ruling of the Labor Arbiter and declared the dismissal as illegal. The dispositive portion of the NLRC’s decision
reads:
WHEREFORE, premises considered, the decision appealed from is hereby reversed and set aside and a new one entered declaring the dismissal of
the complainant as illegal. Respondents Falcon Maritime & Allied Services, Inc. and Hansu Corporation are hereby ordered to
jointly and severally pay complainant the amount equivalent to his three (3) months salary as a result thereof. [12]
The NLRC held that the fax messages in support of the alleged misbehavior and neglect of duty by petitioner have no probative value and are self-
serving. It added that the ship’s logbook should have been submitted in evidence as it is the repository of all the activities on
board the vessel, especially those affecting the performance or attitude of the officers and crew members, and, more
importantly, the procedures preparatory to the discharge of a crew member. The NLRC also noted that private respondent
failed to comply with due process in terminating petitioner’s employment. [13]
Private respondent moved for reconsideration, [14] claiming that the complaint was filed beyond the one-year prescriptive period. The NLRC,
however, denied reconsideration in a Resolution dated 30 August 2002. [15] Rejecting the argument that the complaint had
already prescribed, it ruled:
Records show that respondent in this case had filed a motion to dismiss on the ground of prescription before the Labor Arbiter a quo who denied the
same in an Order dated August 1, 2000. Such an Order being unappealable, the said issue of prescription cannot be raised
anew specially in a motion for reconsideration. (Citations omitted) [16]
It appears that respondent received a copy of the NLRC Resolution [17] on 24 September 2002 and that said resolution became final and executory
on 7 October 2002. [18]
Private respondent brought the case to the Court of Appeals via a Petition for Certiorari [19] on 8 October 2002. The petition, docketed as CA-G.R.
Sp. No. 73521, was dismissed on technicality in a Resolution dated 29 October 2002. The pertinent portion of the resolution
reads:
(1) [T]he VERIFICATION AND CERTIFICATION OF NON-FORUM SHOPPING was signed by one Florida Z. Jose, President of
petitioner Falcon Maritime and Allied Services, Inc., without proof that she is the duly authorized representative of petitioner-
corporation;
(2) [T]here is no affidavit of service of the petition to the National Labor Relations Commission and to the adverse party;
(3) [T]here is no explanation to justify service by mail in lieu of the required personal service. (Citations omitted) [20]
An entry of judgment was issued by the clerk of court on 23 November 2002 stating that the 29 October 2002 Resolution had already become final
and executory. [21] Meanwhile, on 12 November 2002, private respondent filed another petition before the Court of Appeals,
[22] docketed as CA G.R. SP No. 73790. This is the subject of the present petition.
Petitioner dispensed with the filing of a comment. [23] In his Memorandum, [24] however, he argued that an entry of judgment having been issued
in CA-G.R. SP No. 73521, the filing of the second petition hinging on the same cause of action after the first petition had been
dismissed violates not only the rule on forum shopping but also the principle of res judicata. He highlighted the fact that the
decision subject of the second petition before the Court of Appeals had twice become final and executory, with entries of
judgment made first by the NLRC and then by the Court of Appeals.
The appellate court ultimately settled the issue of prescription, categorically declaring that the one-year prescriptive period applies only to
employment contracts entered into as of 1 January 1997 and not those entered prior thereto, thus:
x x x The question of prescription is untenable. Admittedly, POEA Memorandum Circular [No.] 55 prescribing the standard terms of an employment
contract of a seafarer was in effect when the respondent was repatriated on January 21, 1997. This administrative issuance was
released in accordance with Department Order [No.] 33 of the Secretary of Labor directing the revision of the existing
Standard Employment Contract to be effective by January 1, 1997. Section 28 of this revised contract states: all claims arising
therefrom shall be made within one year from the date of the seafarer’s return to the point of hire.
It is crystal clear that the one-year period of prescription of claims in the revised standard contract applies only to employment contracts entered into
as of January 1, 1997. If there is still any doubt about this, it should be removed by the provision of Circular [No.] 55 which
says that the new schedule of benefits to be embodied in the standard contract will apply to any Filipino seafarer that will be
deployed on or after the effectivity of the circular.
The respondent was deployed before January 1, 1997. As acknowledged by the petitioners, the rule prior to Circular [No.] 55 provided for a
prescriptive period of three years. We cannot avoid the ineluctable conclusion that the claim of the respondent was filed within
the prescriptive period. [25]
Despite ruling that prescription had not set in, the appellate court nonetheless declared petitioner’s dismissal from employment as valid and reinstated
the Labor Arbiter’s decision.
The appellate court relied on the fax messages issued by the ship master shortly after petitioner had committed a serious neglect of his duties. It
noted that the said fax messages constitute the res gestae. In defending the non-presentation of the logbook, it stated that three
years had already passed since the incident and Hansu was no longer the principal of private respondent.
Petitioner’s motion for reconsideration was denied. Hence he filed this instant petition.
Citing grave abuse of discretion on the part of the Court of Appeals, petitioner reiterates his argument that the appellate court should not have
accepted the second petition in view of the fact that a corresponding entry of judgment already has been issued. By filing the
second petition, petitioner believes that private respondent has engaged in forum shopping. [26]
Private respondent, for its part, defends the appellate court in taking cognizance of the second petition by stressing that there is no law, rule or
decision that prohibits the filing of a new petition for certiorari within the reglementary period after the dismissal of the first
petition due to technicality. [27] It rebuts petitioner’s charge of forum shopping by pointing out that the dismissal of the first
petition due to technicality has not ripened into res judicata, which is an essential element of forum shopping. [28]
In determining whether a party has violated the rule against forum shopping, the test to be applied is whether the elements of litis pendentia are
present or whether a final judgment in one case will amount to res judicata in the other. [29] This issue has been thoroughly
and extensively discussed and correctly resolved by the Court of Appeals in this wise:
The respondent’s two arguments essay on certain developments in the case after the NLRC rendered its decision. He points out with alacrity that an
entry of judgment was issued twice – first by the NLRC with respect to its decision and then by the Ninth Division of the Court
of Appeals after it dismissed on technical grounds the first petition for certiorari filed by the petitioner. Neither event, for sure,
militates against the institution of a second petition for certiorari. A decision of the NLRC is never final for as long as it is the
subject of a petition for certiorari that is pending with a superior court. A contrary view only demeans our certiorari
jurisdiction and will never gain currency under our system of appellate court review. It is more to the point to ask if a second
petition can stand after the first is dismissed, but under the particular circumstances in which the second was brought, we hold
that it can. The theory of res judicata invoked by the respondent to bar the filing of the second petition does not apply. The
judgment or final resolution in the first petition must be on the merits for res judicata to inhere, and it will not be on the merits
if it is founded on a consideration of only technical or collateral points. Yet this was exactly how the first petition was disposed
of. SP 73521 was dismissed as a result of the failure of the petitioner to comply with the procedural requirements of a petition
for certiorari. The case never touched base. There was no occasion for the determination of the substantive rights of the parties
and, in this sense, the merits of the case were not involved. The petitioner had actually the option of either refilling [sic] the
case or seeking reconsideration in the original action. It chose to file SP 73790 after realizing that it still had enough time left
of the original period of 60 days under Rule 65 to do so.
Since the dismissal of the first petition did not ripen into res judicata, it may not be said that there was forum shopping with the filing of the second.
The accepted test for determining whether a party violated the rule against forum shopping insofar as it is applicable to this
setting is whether the judgment or final resolution in the first case amounts to res judicata in the second. Res judicata is central
to the idea of forum shopping. Without it, forum shopping is non-existent. The dismissal of the first petition, moreover, if it
does not amount to res judicata, need not be mentioned in the certification of non-forum shopping accompanying the second
action. The omission will not be fatal to the viability of the second case. (Citations omitted) [30]
Private respondent, in turn, questions the propriety of the instant certiorari petition and avers that the issues raised by petitioner can only be dealt with
under Rule 45 of the Rules of Court. [31] Against this thesis, petitioner submits that the acceptance of the petition is addressed
to the sound discretion of this Court. [32]
The proper remedy to assail decisions of the Court of Appeals involving final disposition of a case is through a petition for review under
Rule 45. In this case, petitioner filed instead a certiorari petition under Rule 65. Notwithstanding this procedural lapse, this
Court resolves to rule on the merits of the petition in the interest of substantial justice, [33] the underlying consideration in this
petition being the arbitrary dismissal of petitioner from employment.
Petitioner submits that the Court of Appeals erred in relying merely on fax messages to support the validity of his dismissal from
employment. He maintains that the first fax message containing the information that the vessel encroached on a different route
was a mere personal observation of the ship master and should have thus been corroborated by evidence, and that these fax
messages cannot be considered as res gestae because the statement of the ship master embodied therein is just a report. He also
contends that he has not caused any immediate danger to the vessel and that if he did commit any wrongdoing, the incident
would have been recorded in the logbook. Thus, he posits that the failure to produce the logbook reinforces the theory that the
fax messages have been concocted to justify his unceremonious dismissal from employment. Hence, he believes that his
dismissal from employment stemmed from his filing of the complaint with the ITF which his superiors resented. [34]
Private respondent insists that the appellate court is correct in considering the fax messages as res gestae statements. It likewise
emphasizes that non-presentment of the logbook is justified as the same could no longer be retrieved because Hansu has
already ceased to be its principal. Furthermore, it refutes the allegation of petitioner that he was dismissed because he filed a
complaint with the ITF in behalf of his fellow crew members. It claims that petitioner’s allegation is a hoax because there is no
showing that the alleged complaint has been received by the ITF and that no action thereon was ever taken by the ITF. [35]
Private respondent also asserts that petitioner was not dismissed but that he voluntarily asked for his repatriation. This assertion, however,
deserves scant consideration. It is highly illogical for an employee to voluntarily request for repatriation and then file a suit for
illegal dismissal. As voluntary repatriation is synonymous to resignation, it is proper to conclude that repatriation is
inconsistent with the filing of a complaint for illegal dismissal. [36]
The paramount issue therefore boils down to the validity of petitioner’s dismissal, the determination of which generally involves a question of fact. It
is not the function of this Court to assess and evaluate the facts and the evidence again, our jurisdiction being generally limited
to reviewing errors of law that might have been committed by the trial court or administrative agency. Nevertheless, since the
factual findings of the Court of Appeals and the Labor Arbiter are at variance with those of the NLRC, we resolve to evaluate
the records and the evidence presented by the parties. [37]
The validity of an employee's dismissal hinges on the satisfaction of two substantive requirements, to wit: (1) the dismissal must be for any
of the causes provided for in Article 282 of the Labor Code; and (2) the employee was accorded due process, basic of which is
the opportunity to be heard and to defend himself. [38]
The Labor Arbiter held that petitioner’s absence during his watch duty when an emergency call was received from the Japanese port authority that
M/V Phoenix Seven was “invading other route” constituted neglect of duty, a just cause for terminating an employee. Records
reveal that this information was related to private respondent via two fax messages sent by the captain of M/V Phoenix Seven.
The first fax message dated 18 January 1997 is reproduced below:
JUST RECEIVED PHONE CALL FROM MASTER N C/OFFICER THAT THEY DECIDED TO DISCHARGE 2/OFFICER AT OSAKA PORT.
DUE TO MIS-BEHAVIOUR N RESEST [SIC] TO OFFICIAL ORDER.
CAPT. HAD RECEIVED EMERGENCY WARNING CALL FROM JAPAN BISAN SETO NAIKAI RADIO AUTHORITY THAT SHIP IS
INVADING OTHER ROUTE.
SO, HE WAS SURPRISED N CAME TO BRIDGE N FOUND 2/O NOT CARRY OUT HIS WATCH DUTY.
MASTER SCOLD HIM ABOUT THIS N CORRECT HIS ERROR BUT HE RESIST [SIC] THAT HE IS RIGHT AND THEN SAID THAT HE
WILL COME BACK HOME.
FURTHER MORE HE ASKED MASTER TO PAY HIM I.T.F. WAGE SCALE.
MASTER N/CIO STRONGLY ASKED US HIS REPATRIATION WITH I.E.U.
PLS. CONFIRM YOUR OPINION ON THIS HAPPENING. [39]
The second fax message dated 20 January 1997 pertained to a report of crew discharge essentially containing the same information as the first fax
message. The Court of Appeals treated these fax messages as part of the res gestae proving neglect of duty on the part of
petitioner.
Section 42 of Rule 130 [40] of the Rules of Court mentions two acts which form part of the res gestae, namely: spontaneous statements and verbal
acts. In spontaneous exclamations, the res gestae is the startling occurrence, whereas in verbal acts, the res gestae are the
statements accompanying the equivocal act. [41] We find that the fax messages cannot be deemed part of the res gestae.
To be admissible under the first class of res gestae, it is required that: (1) the principal act be a startling occurrence; (2) the statements were made
before the declarant had the time to contrive or devise a falsehood; and (3) that the statements must concern the occurrence in
question and its immediate attending circumstances. [42]
Assuming that petitioner’s negligence—which allegedly caused the ship to deviate from its course—is the startling occurrence, there is no showing
that the statements contained in the fax messages were made immediately after the alleged incident. In addition, no dates have
been mentioned to determine if these utterances were made spontaneously or with careful deliberation. Absent the critical
element of spontaneity, the fax messages cannot be admitted as part of the res gestae of the first kind.
Neither will the second kind of res gestae apply. The requisites for its admissibility are: (1) the principal act to be characterized must be equivocal;
(2) the equivocal act must be material to the issue; (3) the statement must accompany the equivocal act; and (4) the statements
give a legal significance to the equivocal act. [43]
Petitioner’s alleged absence from watch duty is simply an innocuous act or at least proved to be one. Assuming arguendo that such absence was the
equivocal act, it is nevertheless not accompanied by any statement more so by the fax statements adverted to as parts of the res
gestae. No date or time has been mentioned to determine whether the fax messages were made simultaneously with the
purported equivocal act.
Furthermore, the material contents of the fax messages are unclear. The matter of route encroachment or invasion is questionable. The ship master,
who is the author of the fax messages, did not witness the incident. He obtained such information only from the Japanese port
authorities. Verily, the messages can be characterized as double hearsay.
In any event, under Article 282 of the Labor Code, [44] an employer may terminate an employee for gross and habitual neglect of duties. Neglect
of duty, to be a ground for dismissal, must be both gross and habitual. Gross negligence connotes want of care in the
performance of one’s duties. Habitual neglect implies repeated failure to perform one’s duties for a period of time, depending
upon the circumstances. A single or isolated act of negligence does not constitute a just cause for the dismissal of the employee.
[45]
Petitioner’s supposed absence from watch duty in a single isolated instance is neither gross nor habitual negligence. Without question, the
alleged lapse did not result in any untoward incident. If there was any serious aftermath, the incident should have been
recorded in the ship’s logbook and presented by private respondent to substantiate its claim. Instead, private respondent
belittled the probative value of the logbook and dismissed it as self-serving. Quite the contrary, the ship’s logbook is the
repository of all activities and transactions on board a vessel. Had the route invasion been so serious as to merit petitioner’s
dismissal, then it would have been recorded in the logbook. Private respondent would have then had all the more reason to
preserve it considering that vital pieces of information are contained therein.
In Haverton Shipping Ltd. v. NLRC, [46] the Court held that the vessel’s logbook is an official record of entries made by a person in the performance
of a duty required by law. [47] In Abacast Shipping and Management Agency, Inc. v. NLRC, [48] a case cited by petitioner,
the logbook is a respectable record that can be relied upon to authenticate the charges filed and the procedure taken against the
employees prior to their dismissal. [49] In Wallem Maritime Services, Inc. v. NLRC, [50] the logbook is a vital evidence as
Article 612 of the Code of Commerce requires the ship captain to keep a record of the decisions he had adopted as the vessel's
head. [51] Therefore, the non-presentation of the logbook raises serious doubts as to whether the incident did happen at all.
In termination cases, the burden of proving just or valid cause for dismissing an employee rests on the employer. [52] Private respondent miserably
failed to discharge this burden. Consequently, the petitioner’s dismissal is illegal.
We also note that private respondent failed to comply with the procedural due process requirement for terminating an employee. Such requirement is
not a mere formality that may be dispensed with at will. Its disregard is a matter of serious concern since it constitutes a
safeguard of the highest order in response to man's innate sense of justice. The Labor Code does not, of course, require a
formal or trial type proceeding before an erring employee may be dismissed. This is especially true in the case of a vessel on
the ocean or in a foreign port. The minimum requirement of due process in termination proceedings, which must be complied
with even with respect to seamen on board a vessel, consists of notice to the employees intended to be dismissed and the grant
to them of an opportunity to present their own side of the alleged offense or misconduct, which led to the management's
decision to terminate. To meet the requirements of due process, the employer must furnish the worker sought to be dismissed
with two written notices before termination of employment can be legally effected, i.e., (1) a notice which apprises the
employee of the particular acts or omissions for which his dismissal is sought; and (2) the subsequent notice after due hearing
which informs the employee of the employer’s decision to dismiss him. [53]
Private respondent’s sole reliance on the fax messages in dismissing petitioner is clearly insufficient as these messages were addressed only to itself.
No notice was ever given to petitioner apprising him in writing of the particular acts showing neglect of duty. Neither was he
informed of his dismissal from employment. Petitioner was never given an opportunity to present his side. The failure to
comply with the two-notice rule only aggravated respondent’s liability on top of dismissing petitioner without a valid cause.
Pursuant to Section 10 of Republic Act No. 8042 [54] or the Migrant Worker’s Act, employees who are unjustly dismissed from work are entitled to
an amount representing their three (3) months’ salary considering that their employment contract has a term of exactly one (1)
year plus a full refund of his placement fee, with interest at 12% per annum. [55]
IN LIGHT OF THE FOREGOING, the petition is GRANTED. The Decision of the Court of Appeals is REVERSED and SET ASIDE. The
Decision of the NLRC is REINSTATED with the MODIFICATION that in addition to the payment of the sum equivalent to
petitioner’s three (3) months’ salary, the full amount of placement fee with 12% legal interest must be refunded.
SO ORDERED.
FIRST DIVISION
AIR TRANSPORTATION G.R. No. 174011

OFFICE, DEPARTMENT OF
PUBLIC WORKS AND
HIGHWAYS and MACTAN-CEBU
INTERNATIONAL AIRPORT
AUTHORITY,
Petitioners, Present:
PUNO, C.J., Chairperson,

CARPIO,
- versus - CORONA,
AZCUNA* and
LEONARDO-DE CASTRO, JJ.
ANGELES URGELLO TONGOY
and the HEIRS OF PILAR U.
ARCENAS, namely, ENRIQUE
ARCENAS, MONETTE ARCENAS
SANCHEZ, RENATO U. ARCENAS,
PATRICIA ARCENAS TING,
ROY U. ARCENAS, VICTOR U.
ARCENAS and ROSENDO U.
ARCENAS,**
April 14, 2008

x------------------------------------------x
RESOLUTION
CORONA, J.:
This is a petition for review on certiorari [1] of the March 31, 2004 decision and August 2, 2006 resolution [2] of the Court of
Appeals (CA) in CA-G.R. CV No. 55114.
In 1963, the Republic of the Philippines instituted expropriation proceedings for the improvement and expansion of the Lahug Airport in
Cebu City. Among the properties affected were Lot Nos. 913-F and 913-G belonging to respondents. [3] The trial court ruled in favor of the
government. The respondents filed an appeal. [4]
Pending the appeal, the parties entered into a verbal compromise agreement whereby the owners of the affected lots agreed to withdraw
their appeal in consideration of a commitment that, pursuant to an established policy involving similar cases, the subject lots would be resold to them
at the same price at which they were expropriated in the event that the Civil Aeronautics Administration (CAA), predecessor of petitioner Air
Transportation Office (ATO), [5] later abandoned the Lahug Airport. [6] Consequently, the respondents withdrew their appeal. [7]
In accordance with the expropriation, the subject properties were registered in the name of the government. However, the projected
improvement and expansion plan did not materialize as ATO decided to move its operations to the Mactan Airbase and to instead lease out the area
of the Lahug Airport. Petitioner Department of Public Works and Highways constructed a building on a portion of the subject properties. [8]
In 1964 or a year after the expropriation, respondents requested the repurchase of the lots in accordance with the commitment of the CAA.
On August 10, 1964, the CAA responded that there could still be a need to use the Lahug Airport as an emergency DC-3 airport. It reiterated,
however, that “should this office dispose and resell the properties which may be found out to be no longer necessary as an airport, then the policy of
this office is to give priority to the former owners subject to the approval of the President.” [9]
On January 7, 1967, respondents reiterated their offer to repurchase the properties, referring to an executive order of President
Ferdinand Marcos which directed the closure of the Lahug Airport and transferred all aviation operations to Mactan Airbase. The Director of the
CAA, in a letter dated Mach 28, 1967, informed respondents that their office had no plans yet of abandoning Lahug Airport. [10]
In a memorandum dated November 29, 1989 to the Secretary of the Department of Transportation, [11] President Corazon Aquino directed
the transfer of general aviation operations of the Lahug Airport to the Mactan International Airport before the end of 1990, and upon such transfer, to
close the Lahug Airport. By virtue of RA 6958, [12] the management and aeronautics operations of Lahug Airport were transferred to petitioner
Mactan-Cebu International Airport Authority (MCIAA). [13]
In 1992, respondents filed an action for recovery of possession and reconveyance of ownership of properties with damages in the Regional
Trial Court (RTC), Cebu City, Branch 21 against petitioners. [14] Petitioners did not present any testimonial or documentary evidence. Neither did
they cross-examine the witness presented by respondents. They also failed to submit any memorandum despite the ample time given to file it. [15]
The RTC rendered a decision on December 27, 1995 ordering petitioners to restore possession and ownership of Lot Nos. 913-F and 913-G
to respondents and to remove all improvements thereon upon reimbursement of the just compensation paid to respondents at the time of
expropriation. It also ordered the Register of Deeds of Cebu City to issue new transfer certificates of title in the name of respondents, upon payment
of the proper fees. [16] It held that respondents were able to prove the oral agreement that the lots could be repurchased by their previous owners for
the same price at which they were expropriated in case the CAA abandoned Lahug Airport.
Aggrieved, petitioners filed an appeal in the CA. In a decision dated March 31, 2004, the CA affirmed the RTC judgment. It denied
reconsideration in a resolution promulgated on August 2, 2006.
Hence this petition which boils down to one core issue: whether the respondents were able to prove that there was an oral compromise
agreement that entitled them to repurchase the expropriated lots.
*
*
The issue raised by petitioners is factual. Both the RTC and CA found that there was such an agreement and that petitioners failed to rebut
the evidence presented by respondents. We find no reason to disturb their findings.
Moreover, in Heirs of Timoteo Moreno and Maria Rotea v. MCIAA [17] involving lots similarly expropriated for the expansion of the
same Lahug Airport, we recognized the right of the previous owners who were able to prove the commitment of the government to allow them to
repurchase their land:
The indisputable certainty in the present case is that there was a prior promise by the predecessor of the respondent that the expropriated
properties may be recovered by the former owners once the airport is transferred to Mactan, Cebu. In fact, the witness for the respondent testified that
15 lots were already reconveyed to their previous owners. [18]
MCIAA v. CA [19] and ATO v. Gopuco [20] cited by petitioners are not applicable here. In MCIAA, the previous owner failed to prove
that there was a compromise settlement. [21] In ATO, the previous owner was not a party to the compromise agreements. [22]
WHEREFORE, the petition is hereby DENIED.
No costs.
SO ORDERED
Republic of the Philippines
Supreme Court
Baguio City
THIRD DIVISION
JAPAN AIRLINES, G.R. No. 170141

Petitioner,
Present:
- versus - YNARES-SANTIAGO, J.,

Chairperson,
MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
Promulgated:
JESUS SIMANGAN,
Respondent. April 22, 2008
x--------------------------------------------------x
DECISION
REYES, R.T., J.:
WHEN an airline issues a ticket to a passenger confirmed on a particular flight on a certain date, a contract of carriage arises, and the passenger has
every right to expect that he would fly on that flight and on that date. If he does not, then the carrier opens itself to a suit for breach of contract of
carriage. [1]
The power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by Japan Airlines (JAL). [2]
In this petition for review on certiorari, [3] petitioner JAL appeals the: (1) Decision [4] dated May 31, 2005 of the Court of Appeals (CA) ordering it
to pay respondent Jesus Simangan moral and exemplary damages; and (2) Resolution [5] of the same court dated September 28, 2005 denying
JAL’s motion for reconsideration.
The Facts
In 1991, respondent Jesus Simangan decided to donate a kidney to his ailing cousin, Loreto Simangan, in UCLA School of Medicine in Los Angeles,
California, U.S.A. Upon request of UCLA, respondent undertook a series of laboratory tests at the National Kidney Institute in Quezon City to verify
whether his blood and tissue type are compatible with Loreto’s. [6] Fortunately, said tests proved that respondent’s blood and tissue type were well-
matched with Loreto’s. [7]
Respondent needed to go to the United States to complete his preliminary work-up and donation surgery. Hence, to facilitate respondent’s travel to
the United States, UCLA wrote a letter to the American Consulate in Manila to arrange for his visa. In due time, respondent was issued an
emergency U.S. visa by the American Embassy in Manila. [8]
Having obtained an emergency U.S. visa, respondent purchased a round trip plane ticket from petitioner JAL for US$1,485.00 and was issued the
corresponding boarding pass. [9] He was scheduled to a particular flight bound for Los Angeles, California, U.S.A. via Narita, Japan. [10]
On July 29, 1992, the date of his flight, respondent went to Ninoy Aquino International Airport in the company of several relatives and
friends. [11] He was allowed to check-in at JAL’s counter. [12] His plane ticket, boarding pass, travel authority and personal articles were subjected
to rigid immigration and security routines. [13] After passing through said immigration and security procedures, respondent was allowed by JAL to
enter its airplane. [14]
While inside the airplane, JAL’s airline crew suspected respondent of carrying a falsified travel document and imputed that he would only use the trip
to the United States as a pretext to stay and work in Japan. [15] The stewardess asked respondent to show his travel documents. Shortly after, the
stewardess along with a Japanese and a Filipino haughtily ordered him to stand up and leave the plane. [16] Respondent protested, explaining that he
was issued a U.S. visa. Just to allow him to board the plane, he pleaded with JAL to closely monitor his movements when the aircraft stops over in
Narita. [17] His pleas were ignored. He was then constrained to go out of the plane. [18] In a nutshell, respondent was bumped off the flight.
Respondent went to JAL’s ground office and waited there for three hours. Meanwhile, the plane took off and he was left behind. [19] Afterwards, he
was informed that his travel documents were, indeed, in order. [20] Respondent was refunded the cost of his plane ticket less the sum of US$500.00
which was deducted by JAL. [21] Subsequently, respondent’s U.S. visa was cancelled. [22]
Displeased by the turn of events, respondent filed an action for damages against JAL with the Regional Trial Court (RTC) in Valenzuela City,
docketed as Civil Case No. 4195-V-93. He claimed he was not able to donate his kidney to Loreto; and that he suffered terrible embarrassment and
mental anguish. [23] He prayed that he be awarded P3 million as moral damages, P1.5 million as exemplary damages and P500,000.00 as attorney’s
fees. [24]
JAL denied the material allegations of the complaint. It argued, among others, that its failure to allow respondent to fly on his scheduled departure
was due to “a need for his travel documents to be authenticated by the United States Embassy” [25] because no one from JAL’s airport staff had
encountered a parole visa before. [26] It posited that the authentication required additional time; that respondent was advised to take the flight the
following day, July 30, 1992. JAL alleged that respondent agreed to be rebooked on July 30, 1992. [27]
JAL also lodged a counterclaim anchored on respondent’s alleged wrongful institution of the complaint. It prayed for litigation expenses, exemplary
damages and attorney’s fees. [28]
On September 21, 2000, the RTC presided by Judge Floro P. Alejo rendered its decision in favor of respondent (plaintiff), disposing as follows:
WHEREFORE, judgment is hereby rendered ordering the defendant to pay the plaintiff the amount of P1,000,000.00 as moral damages, the amount
of P500,000.00 as exemplary damages and the amount of P250,000.00 as attorney’s fees, plus the cost of suit. [29]
The RTC explained:
In summarily and insolently ordering the plaintiff to disembark while the latter was already settled in his assigned seat, the defendant violated the
contract of carriage; that when the plaintiff was ordered out of the plane under the pretext that the genuineness of his travel documents would be
verified it had caused him embarrassment and besmirched reputation; and that when the plaintiff was finally not allowed to take the flight, he
suffered more wounded feelings and social humiliation for which the plaintiff was asking to be awarded moral and exemplary damages as well as
attorney’s fees.
The reason given by the defendant that what prompted them to investigate the genuineness of the travel documents of the plaintiff was that the
plaintiff was not then carrying a regular visa but just a letter does not appear satisfactory. The defendant is engaged in transporting passengers by
plane from country to country and is therefore conversant with the travel documents. The defendant should not be allowed to pretend, to the
prejudice of the plaintiff not to know that the travel documents of the plaintiff are valid documents to allow him entry in the United States.
The foregoing act of the defendant in ordering the plaintiff to deplane while already settled in his assigned seat clearly demonstrated that the
defendant breached its contract of carriage with the plaintiff as passenger in bad faith and as such the plaintiff is entitled to moral and exemplary
damages as well as to an award of attorney’s fees. [30]
Disagreeing with the RTC judgment, JAL appealed to the CA contending that it is not guilty of breach of contract of carriage, hence, not liable for
damages. [31] It posited that it is the one entitled to recover on its counterclaim. [32]
CA Ruling
In a Decision [33] dated May 31, 2005, the CA affirmed the decision of the RTC with modification in that it lowered the amount of moral and
exemplary damages and deleted the award of attorney’s fees. The fallo of the CA decision reads:
WHEREFORE, the appealed Decision is AFFIRMED with MODIFICATION. Appellant JAPAN AIR LINES is ordered to pay appellee JESUS
SIMANGAN the reduced sums, as follows: Five Hundred Thousand Pesos (P500,000.00) as moral damages, and Two Hundred Fifty Thousand
Pesos (P250,000.00) as exemplary damages. The award of attorney’s fees is hereby DELETED. [34]
The CA elucidated that since JAL issued to respondent a round trip plane ticket for a lawful consideration, “there arose a perfected contract between
them.” [35] It found that respondent was “haughtily ejected” [36] by JAL and that “he was certainly embarrassed and humiliated” [37] when, in the
presence of other passengers, JAL’s airline staff “shouted at him to stand up and arrogantly asked him to produce his travel papers, without the least
courtesy every human being is entitled to”; [38] and that “he was compelled to deplane on the grounds that his papers were fake.” [39]
The CA ratiocinated:
While the protection of passengers must take precedence over convenience, the implementation of security measures must be attended by basic
courtesies.
In fact, breach of the contract of carriage creates against the carrier a presumption of liability, by a simple proof of injury, relieving the injured
passenger of the duty to establish the fault of the carrier or of his employees; and placing on the carrier the burden to prove that it was due to an
unforeseen event or to force majeure.
That appellee possessed bogus travel documents and that he might stay illegally in Japan are allegations without substantiation. Also, appellant’s
attempt to rebook appellee the following day was too late and did not relieve it from liability. The damage had been done. Besides, its belated theory
of novation, i.e., that appellant’s original obligation to carry appellee to Narita and Los Angeles on July 29, 1992 was extinguished by novation when
appellant and appellant agreed that appellee will instead take appellant’s flight to Narita on the following day, July 30, 1992, deserves little attention.
It is inappropriate at bar. Questions not taken up during the trial cannot be raised for the first time on appeal. [40] (Underscoring ours and citations
were omitted)
Citing Ortigas, Jr. v. Lufthansa German Airlines, [41] the CA declared that “(i)n contracts of common carriage, inattention and lack of care on the
part of the carrier resulting in the failure of the passenger to be accommodated in the class contracted for amounts to bad faith or fraud which entitles
the passengers to the award of moral damages in accordance with Article 2220 of the Civil Code.” [42]
Nevertheless, the CA modified the damages awarded by the RTC. It explained:
Fundamental in the law on damages is that one injured by a breach of a contract, or by a wrongful or negligent act or omission shall have a fair and
just compensation commensurate to the loss sustained as consequence of the defendant’s act. Being discretionary on the court, the amount, however,
should not be palpably and scandalously excessive.
Here, the trial court’s award of P1,000,000.00 as moral damages appears to be overblown. No other proof of appellee’s social standing, profession,
financial capabilities was presented except that he was single and a businessman. To Us, the sum of 500,000.00 is just and fair. For, moral damages
are emphatically not intended to enrich a complainant at the expense of the defendant. They are awarded only to enable the injured party to obtain
means, diversion or amusements that will serve to alleviate the moral suffering he has undergone, by reason of the defendant’s culpable action.
Moreover, the grant of P500,000.00 as exemplary damages needs to be reduced to a reasonable level. The award of exemplary damages is designed
to permit the courts to mould behavior that has socially deleterious consequences and its imposition is required by public policy to suppress the
wanton acts of the offender. Hence, the sum of P250,000.00 is adequate under the circumstances.
The award of P250,000.00 as attorney’s fees lacks factual basis. Appellee was definitely compelled to litigate in protecting his rights and in seeking
relief from appellant’s misdeeds. Yet, the record is devoid of evidence to show the cost of the services of his counsel and/or the actual expenses
incurred in prosecuting his action. [43] (Citations were omitted)
When JAL’s motion for reconsideration was denied, it resorted to the petition at bar.
Issues
JAL poses the following issues –

I.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT WAS ENTITLED TO MORAL DAMAGES,
CONSIDERING THAT:
A. JAL WAS NOT GUILTY OF BREACH OF CONTRACT.
B. MORAL DAMAGES MAY BE AWARDED IN BREACH OF CONTRACT CASES ONLY WHEN THE BREACH IS ATTENDED BY
FRAUD OR BAD FAITH. ASSUMING ARGUENDO THAT JAL WAS GUILTY OF BREACH, JAL DID NOT ACT FRAUDULENTLY OR IN
BAD FAITH AS TO ENTITLE RESPONDENT TO MORAL DAMAGES.
C. THE LAW DISTINGUISHES A CONTRACTUAL BREACH EFFECTED IN GOOD FAITH FROM ONE ATTENDED BY BAD FAITH.
II.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT WAS ENTITLED TO EXEMPLARY
DAMAGES CONSIDERING THAT:
A. EXEMPLARY DAMAGES ARE NOT RECOVERABLE IN BREACH OF CONTRACT OF CARRIAGE UNLESS THE CARRIER IS
GUILTY OF WANTON, FRAUDULENT, RECKLESS, OPPRESSIVE OR MALEVOLENT CONDUCT.
B. ASSUMING ARGUENDO THAT JAL WAS GUILTY OF BREACH, JAL DID NOT ACT IN A WANTON FRAUDULENT,
RECKLESS, OPPRESSIVE OR MALEVOLENT MANNER AS TO ENTITLE RESPONDENT TO EXEMPLARY DAMAGES.
III.
ASSUMING ARGUENDO THAT RESPONDENT WAS ENTITLED TO AN AWARD OF DAMAGES, WHETHER OR NOT THE COURT OF
APPEALS AWARD OF P750,000 IN DAMAGES WAS EXCESSIVE AND UNPRECEDENTED.
IV.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING FOR JAL ON ITS COUNTERCLAIM. [44] (Underscoring Ours)
Basically, there are three (3) issues to resolve here: (1) whether or not JAL is guilty of contract of carriage; (2) whether or not respondent is entitled
to moral and exemplary damages; and (3) whether or not JAL is entitled to its counterclaim for damages.
Our Ruling
This Court is not a trier of facts.
Chiefly, the issues are factual. The RTC findings of facts were affirmed by the CA. The CA also gave its nod to the reasoning of the RTC except as
to the awards of damages, which were reduced, and that of attorney’s fees, which was deleted.
We are not a trier of facts. We generally rely upon, and are bound by, the conclusions on this matter of the lower courts, which are better equipped
and have better opportunity to assess the evidence first-hand, including the testimony of the witnesses. [45]
We have repeatedly held that the findings of fact of the CA are final and conclusive and cannot be reviewed on appeal to the Supreme Court provided
they are based on substantial evidence. [46] We have no jurisdiction, as a rule, to reverse their findings. [47] Among the exceptions to this rule are:
(a) when the conclusion is a finding grounded entirely on speculations, surmises or conjectures; (b) when the inference made is manifestly mistaken,
absurd or impossible; (c) where there is grave abuse of discretion; (d) when the judgment is based on a misapprehension of facts; (e) when the
findings of facts are conflicting; (f) when the CA, in making its findings, went beyond the issues of the case and the same is contrary to the
admissions of both appellant and appellee. [48]
The said exceptions, which are being invoked by JAL, are not found here. There is no indication that the findings of the CA are contrary to the
evidence on record or that vital testimonies of JAL’s witnesses were disregarded. Neither did the CA commit misapprehension of facts nor did it fail
to consider relevant facts. Likewise, there was no grave abuse of discretion in the appreciation of facts or mistaken and absurd inferences.
We thus sustain the coherent facts as established by the courts below, there being no sufficient showing that the said courts committed reversible
error in reaching their conclusions.
JAL is guilty of breach of

contract of carriage.
That respondent purchased a round trip plane ticket from JAL and was issued the corresponding boarding pass is uncontroverted. [49] His plane
ticket, boarding pass, travel authority and personal articles were subjected to rigid immigration and security procedure. [50] After passing through
said immigration and security procedure, he was allowed by JAL to enter its airplane to fly to Los Angeles, California, U.S.A. via Narita, Japan. [51]
Concisely, there was a contract of carriage between JAL and respondent.
Nevertheless, JAL made respondent get off the plane on his scheduled departure on July 29, 1992. He was not allowed by JAL to fly. JAL
thus failed to comply with its obligation under the contract of carriage.
JAL justifies its action by arguing that there was “a need to verify the authenticity of respondent’s travel document.” [52] It alleged that no one from
its airport staff had encountered a parole visa before. [53] It further contended that respondent agreed to fly the next day so that it could first verify
his travel document, hence, there was novation. [54] It maintained that it was not guilty of breach of contract of carriage as respondent was not able
to travel to the United States due to his own voluntary desistance. [55]
We cannot agree. JAL did not allow respondent to fly. It informed respondent that there was a need to first check the authenticity of his travel
documents with the U.S. Embassy. [56] As admitted by JAL, “the flight could not wait for Mr. Simangan because it was ready to depart.” [57]
Since JAL definitely declared that the flight could not wait for respondent, it gave respondent no choice but to be left behind. The latter was
unceremoniously bumped off despite his protestations and valid travel documents and notwithstanding his contract of carriage with JAL. Damage
had already been done when respondent was offered to fly the next day on July 30, 1992. Said offer did not cure JAL’s default.
Considering that respondent was forced to get out of the plane and left behind against his will, he could not have freely consented to be rebooked the
next day. In short, he did not agree to the alleged novation. Since novation implies a waiver of the right the creditor had before the novation, such
waiver must be express. [58] It cannot be supposed, without clear proof, that respondent had willingly done away with his right to fly on July 29,
1992.
Moreover, the reason behind the bumping off incident, as found by the RTC and CA, was that JAL personnel imputed that respondent would only
use the trip to the United States as a pretext to stay and work in Japan. [59]
Apart from the fact that respondent’s plane ticket, boarding pass, travel authority and personal articles already passed the rigid immigration and
security routines, [60] JAL, as a common carrier, ought to know the kind of valid travel documents respondent carried. As provided in Article 1755
of the New Civil Code: “A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with a due regard for all the circumstances.” [61] Thus, We find untenable JAL’s defense of “verification of
respondent’s documents” in its breach of contract of carriage.
It bears repeating that the power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by JAL. [62]
In an action for breach of contract of carriage, all that is required of plaintiff is to prove the existence of such contract and its non-performance by the
carrier through the latter’s failure to carry the passenger safely to his destination. [63] Respondent has complied with these twin requisites.
Respondent is entitled to moral and exemplary damages and attorney’s fees plus legal interest.
With reference to moral damages, JAL alleged that they are not recoverable in actions ex contractu except only when the breach is attended by fraud
or bad faith. It is contended that it did not act fraudulently or in bad faith towards respondent, hence, it may not be held liable for moral damages.
As a general rule, moral damages are not recoverable in actions for damages predicated on a breach of contract for it is not one of the items
enumerated under Article 2219 of the Civil Code. [64] As an exception, such damages are recoverable: (1) in cases in which the mishap results in the
death of a passenger, as provided in Article 1764, in relation to Article 2206(3) of the Civil Code; and (2) in the cases in which the carrier is guilty of
fraud or bad faith, as provided in Article 2220. [65]
The acts committed by JAL against respondent amounts to bad faith. As found by the RTC, JAL breached its contract of carriage with respondent in
bad faith. JAL personnel summarily and insolently ordered respondent to disembark while the latter was already settled in his assigned seat. He was
ordered out of the plane under the alleged reason that the genuineness of his travel documents should be verified.
These findings of facts were upheld by the CA, to wit:
x x x he was haughtily ejected by appellant. He was certainly embarrassed and humiliated when, in the presence of other passengers, the appellant’s
airline staff shouted at him to stand up and arrogantly asked him to produce his travel papers, without the least courtesy every human being is entitled
to. Then, he was compelled to deplane on the grounds that his papers were fake. His protestation of having been issued a U.S. visa coupled with his
plea to appellant to closely monitor his movements when the aircraft stops over in Narita, were ignored. Worse, he was made to wait for many hours
at the office of appellant only to be told later that he has valid travel documents. [66] (Underscoring ours)
Clearly, JAL is liable for moral damages. It is firmly settled that moral damages are recoverable in suits predicated on breach of a contract of
carriage where it is proved that the carrier was guilty of fraud or bad faith, as in this case. Inattention to and lack of care for the interests of its
passengers who are entitled to its utmost consideration, particularly as to their convenience, amount to bad faith which entitles the passenger to an
award of moral damages. What the law considers as bad faith which may furnish the ground for an award of moral damages would be bad faith in
securing the contract and in the execution thereof, as well as in the enforcement of its terms, or any other kind of deceit. [67]
JAL is also liable for exemplary damages as its above-mentioned acts constitute wanton, oppressive and malevolent acts against respondent.
Exemplary damages, which are awarded by way of example or correction for the public good, may be recovered in contractual obligations, as in this
case, if defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner. [68]
Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is socially deleterious in its consequence by creating
negative incentives or deterrents against such behaviour. In requiring compliance with the standard of extraordinary diligence, a standard which is, in
fact, that of the highest possible degree of diligence, from common carriers and in creating a presumption of negligence against them, the law seeks
to compel them to control their employees, to tame their reckless instincts and to force them to take adequate care of human beings and their
property. [69]
Neglect or malfeasance of the carrier’s employees could give ground for an action for damages. Passengers have a right to be treated by the carrier’s
employees with kindness, respect, courtesy and due consideration and are entitled to be protected against personal misconduct, injurious language,
indignities and abuses from such employees. [70]
The assessment of P500,000.00 as moral damages and P100,000.00 as exemplary damages in respondent’s favor is, in Our view, reasonable and
realistic. This award is reasonably sufficient to indemnify him for the humiliation and embarrassment he suffered. This also serves as an example to
discourage the repetition of similar oppressive acts.
With respect to attorney's fees, they may be awarded when defendant’s act or omission has compelled plaintiff to litigate with third persons
or to incur expenses to protect his interest. [71] The Court, in Construction Development Corporation of the Philippines v. Estrella, [72] citing
Traders Royal Bank Employees Union-Independent v. National Labor Relations Commission, [73] elucidated thus:
There are two commonly accepted concepts of attorney’s fees, the so-called ordinary and extraordinary. In its ordinary concept, an attorney’s fee is
the reasonable compensation paid to a lawyer by his client for the legal services he has rendered to the latter. The basis of this compensation is the
fact of his employment by and his agreement with the client.
In its extraordinary concept, an attorney’s fee is an indemnity for damages ordered by the court to be paid by the losing party in a litigation. The
basis of this is any of the cases provided by law where such award can be made, such as those authorized in Article 2208, Civil Code, and is payable
not to the lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as additional compensation or as part thereof.
[74]
It was therefore erroneous for the CA to delete the award of attorney’s fees on the ground that the record is devoid of evidence to show the
cost of the services of respondent’s counsel. The amount is actually discretionary upon the Court so long as it passes the test of reasonableness.
They may be recovered as actual or compensatory damages when exemplary damages are awarded and whenever the court deems it just and
equitable, [75] as in this case.
Considering the factual backdrop of this case, attorney’s fees in the amount of P200,000.00 is reasonably modest.
The above liabilities of JAL in the total amount of P800,000.00 earn legal interest pursuant to the Court’s ruling in Construction
Development Corporation of the Philippines v. Estrella, [76] citing Eastern Shipping Lines, Inc. v. Court of Appeals, [77] to wit:
Regarding the imposition of legal interest at the rate of 6% from the time of the filing of the complaint, we held in Eastern Shipping Lines, Inc. v.
Court of Appeals, that when an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the
contravenor can be held liable for payment of interest in the concept of actual and compensatory damages, subject to the following rules, to wit –
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due
should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial
demand under and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be
imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except
when or until the demand can be
established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the
time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time
the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages
may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount
finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls
under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by
then an equivalent to a forbearance of credit. [78] (Emphasis supplied and citations omitted)
Accordingly, in addition to the said total amount of P800,000.00, JAL is liable to pay respondent legal interest. Pursuant to the above ruling of the
Court, the legal interest is 6% and it shall be reckoned from September 21, 2000 when the RTC rendered its judgment. From the time this Decision
becomes final and executory, the interest rate shall be 12% until its satisfaction.
JAL is not entitled to its counterclaim for damages.
The counterclaim of JAL in its Answer [79] is a compulsory counterclaim for damages and attorney’s fees arising from the filing of the complaint.
There is no mention of any other counter claims.
This compulsory counterclaim of JAL arising from the filing of the complaint may not be granted inasmuch as the complaint against it is obviously
not malicious or unfounded. It was filed by respondent precisely to claim his right to damages against JAL. Well-settled is the rule that the
commencement of an action does not per se make the action wrongful and subject the action to damages, for the law could not have meant to impose
a penalty on the right to litigate. [80]
We reiterate case law that if damages result from a party’s exercise of a right, it is damnum absque injuria. [81] Lawful acts give rise to no injury.
Walang perhuwisyong maaring idulot ang paggamit sa sariling karapatan.
During the trial, however, JAL presented a witness who testified that JAL suffered further damages. Allegedly, respondent caused the publications of
his subject complaint against JAL in the newspaper for which JAL suffered damages. [82]
Although these additional damages allegedly suffered by JAL were not incorporated in its Answer as they arose subsequent to its filing, JAL’s
witness was able to testify on the same before the RTC. [83] Hence, although these issues were not raised by the pleadings, they shall be treated in
all respects as if they had been raised in the pleadings.
As provided in Section 5, Rule 10 of the Rules of Court, “(w)hen issues not raised by the pleadings are tried with the express or implied consent of
the parties, they shall be treated in all respects as if they had been raised in the pleadings.”
Nevertheless, JAL’s counterclaim cannot be granted.
JAL is a common carrier. JAL’s business is mainly with the traveling public. It invites people to avail themselves of the comforts and advantages it
offers. [84] Since JAL deals with the public, its bumping off of respondent without a valid reason naturally drew public attention and generated a
public issue.
The publications involved matters about which the public has the right to be informed because they relate to a public issue. This public issue or
concern is a legitimate topic of a public comment that may be validly published.
Assuming that respondent, indeed, caused the publication of his complaint, he may not be held liable for damages for it. The constitutional guarantee
of freedom of the speech and of the press includes fair commentaries on matters of public interest. This is explained by the Court in Borjal v. Court
of Appeals, [85] to wit:
To reiterate, fair commentaries on matters of public interest are privileged and constitute a valid defense in an action for libel or slander. The
doctrine of fair comment means that while in general every discreditable imputation publicly made is deemed false, because every man is presumed
innocent until his guilt is judicially proved, and every false imputation is deemed malicious, nevertheless, when the discreditable imputation is
directed against a public person in his public capacity, it is not necessarily actionable. In order that such discreditable imputation to a public official
may be actionable, it must either be a false allegation of fact or a comment based on a false supposition. If the comment is an expression of opinion,
based on established facts, then it is immaterial that the opinion happens to be mistaken, as long as it might reasonably be inferred from the facts.
[86] (Citations omitted and underscoring ours)
Even though JAL is not a public official, the rule on privileged commentaries on matters of public interest applies to it. The privilege applies not
only to public officials but extends to a great variety of subjects, and includes matters of public concern, public men, and candidates for office. [87]
Hence, pursuant to the Borjal case, there must be an actual malice in order that a discreditable imputation to a public person in his public capacity or
to a public official may be actionable. To be considered malicious, the libelous statements must be shown to have been written or published with the
knowledge that they are false or in reckless disregard of whether they are false or not. [88]
Considering that the published articles involve matters of public interest and that its expressed opinion is not malicious but based on established facts,
the imputations against JAL are not actionable. Therefore, JAL may not claim damages for them.
WHEREFORE, the petition is DENIED. The appealed Decision of the Court of Appeals is AFFIRMED WITH MODIFICATION. As
modified, petitioner Japan Airlines is ordered to pay respondent Jesus Simangan the following: (1) P500,000.00 as moral damages; (2)
P100,000.00 as exemplary damages; and (3) P200,000.00 as attorney’s fees.
The total amount adjudged shall earn legal interest at the rate of 6% per annum from the date of judgment of the Regional Trial Court on September
21, 2000 until the finality of this Decision. From the time this Decision becomes final and executory, the unpaid amount, if any, shall earn legal
interest at the rate of 12% per annum until its satisfaction.
SO ORDERED.
SECOND DIVISION
COASTAL SAFEWAY MARINE SERVICES, INC., G.R. No. 168210

Petitioner,
Present:
QUISUMBING, J., Chairperson,

∗
YNARES-SANTIAGO,
- versus - TINGA,
∗
REYES, * and
∗
LEONARDO-DE CASTRO, ** JJ.
LEONISA M. DELGADO, Promulgated:

Respondent.
June 17, 2008
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
QUISUMBING, J.:
For review are the Decision [1] and Resolution [2] dated February 10, 2005 and May 25, 2005, respectively, of the Court of Appeals in CA-G.R. SP
No. 85961, which had affirmed the Decision [3] dated April 30, 2004 of the National Labor Relations Commission (NLRC), Third Division, in
NLRC NCR CA No. 036508-03.
The antecedent facts are as follows:
Petitioner Coastal Safeway Marine Services, Inc. (Coastal), with Arabian Marine and Terminal Services Co. Ltd. as its principal, hired Jerry M.
Delgado, with the position of General Purpose 2 on board M/V “Lulu 1.” [4] Upon arrival in Saudi Arabia, however, Jerry was instructed to board
another vessel, the M/V “Karan 7,” and was deployed as a Chief Engineer on August 3, 2001.
On December 22, 2001, while on board, Jerry complained of stomach pain. He was immediately treated, but on December 29, 2001, he again fell ill.
On January 8, 2002, while confined at the city hospital in Dharan, Saudi Arabia, Jerry died due to “acute cessation of blood circulation and
respiration.” [5] Thereafter, his remains were transported to Manila.
Respondent Leonisa M. Delgado, Jerry’s wife, demanded payment of death and other benefits from Coastal, but the latter denied her claims. [6]
Hence, Leonisa went to the NLRC on April 1, 2002 and filed a Complaint. [7] Labor Arbiter Francisco A. Robles ruled for Leonisa and awarded her
death benefits and $7,000 for each of their four children. However, her claims for salary differential, moral and exemplary damages, were denied. [8]
The NLRC, upon appeal of Coastal, affirmed the Labor Arbiter’s ruling. It disposed of the case as follows:
Based on records, complainant’s husband was issued a fit to work certification by [Coastal’s] accredited physician prior to his deployment and was
reported by the ship’s captain to be “healthy and energetic”…when he joined the vessel, but barely 5 months thereafter he died as a result of illness
during the term of his contract and not from his own willful or criminal act. The employer/principal is therefore liable... [Coastal] is also answerable
for such death benefits because the law (Sec. 10 of R.A. No. 8042) provides for the solidary liability of the principal and the local agent for any and
all claims of an overseas worker.
xxxx
WHEREFORE, the appeal is DENIED. The Decision dated May 20, 2003 is affirmed in toto.
SO ORDERED. [9]
After its motion for reconsideration was denied, Coastal filed a Petition for Certiorari [10] before the Court of Appeals. The Court of Appeals,
however, dismissed the petition and ruled that based on Section 20(A) [11] of the Philippine Overseas Employment Administration (POEA) Standard
Employment Contract, [12] it is sufficient that Jerry’s death occurred during the term of his employment as to entitle his beneficiaries to claim death
benefits. The fallo of the decision reads:
WHEREFORE, premises considered, the petition is DISMISSED.
SO ORDERED. [13]
Coastal sought reconsideration, but to no avail. Hence, this petition, raising the following as issues:
I.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT AWARDED DEATH BENEFITS TO THE BENEFICIARIES OF
DECEASED JERRY DELGADO BASED ON SECTION 20 OF MEMORANDUM CIRCULAR NO. 55, SERIES OF 1996, WHEN THE
APPLICABLE LAW IS DEPARTMENT ORDER NO. 4 AND MEMORANDUM CIRCULAR NO. 09, SERIES OF 2000 AS EMBODIED IN THE
STANDARD EMPLOYMENT CONTRACT SIGNED BY THE PARTIES.
II.
THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT MANIFESTLY OVERLOOKED CERTAIN
MATERIAL FACTS THAT, IF PROPERLY CONSIDERED, WOULD JUSTIFY A DIFFERENT CONCLUSION.
III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT DISREGARDED THE NOTARIZED QUITCLAIM VOLUNTARILY
EXECUTED BY THE DECEASED JERRY DELGADO IN FAVOR OF THE PETITIONER.
IV.
THE HONORABLE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION IN AFFIRMING THE AWARD OF
ATTORNEY’S FEES IN FAVOR OF RESPONDENT DESPITE THE WANT OF ANY FACTUAL AND LEGAL BASIS. [14]
Simply put, the issues are: (1) Did the Court of Appeals err in awarding death benefits to Jerry’s heirs based on Section 20(A) of the POEA Standard
Employment Contract? (2) Is the affidavit of waiver executed by Jerry valid? (3) Is Leonisa entitled to attorney’s fees?
Petitioner contends that in determining whether Jerry’s death is compensable, Department of Labor and Employment (DOLE) Department Order No.
4, series of 2000 [15] and POEA Memorandum Circular No. 9, series of 2000 [16] should apply because these were the laws embodied in Jerry’s
employment contract.
On the other hand, respondent argues, together with the Court of Appeals, that it is Section 20(A) of the POEA Standard Employment Contract based
on POEA Memorandum Circular No. 055, series of 1996 [17] that should apply.
The employment of seafarers, including claims for death benefits, is governed by the contracts they sign every time they are hired or rehired; [18] and
as long as the stipulations therein are not contrary to law, morals, public order or public policy, they have the force of law between the parties. [19]
While the seafarer and his employer are governed by their mutual agreement, the POEA rules and regulations [20] require that the POEA Standard
Employment Contract be integrated in every seafarer’s contract. [21]
A perusal of Jerry’s employment contract [22] reveals that what was expressly integrated therein by the parties was DOLE Department Order No. 4,
series of 2000 or the POEA Amended Standard Terms and Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going
Vessels, and POEA Memorandum Circular No. 9, series of 2000. However, POEA had issued Memorandum Circular No. 11, series of 2000 [23]
stating that:
In view of the Temporary Restraining Order issued by the Supreme Court in a Resolution dated 11 September 2000 on the implementation of certain
amendments of the Revised Terms and Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels as contained in
DOLE Department Order No. 04 and POEA Memorandum Circular No. 09, both Series of 2000, please be advised of the following:
1. Section 20, Paragraphs (A), (B) and (D) of the former Standard Terms and Conditions Governing the Employment of Filipino Seafarers on
Board Ocean-Going Vessels, as provided in DOLE Department Order No. 33, and POEA Memorandum Circular No. 55, both Series of 1996 shall
apply in lieu of Section 20 (A), (B) and (D) of the Revised Version; (Emphasis supplied.)
xxxx
In effect, POEA Memorandum Circular No. 11-00 thereby paved the way for the application of the POEA Standard Employment Contract based on
POEA Memorandum Circular No. 055, series of 1996. Worth noting, Jerry boarded the ship on August 2001 before the said temporary restraining
order was lifted on June 5, 2002 by virtue of Memorandum Circular No. 2, series of 2002. [24] Consequently, Jerry’s employment contract with
Coastal must conform to Section 20(A) of the POEA Standard Employment Contract based on POEA Memorandum Circular No. 055, series of 1996,
in determining compensability of Jerry’s death.
Section 20(A) of the POEA Standard Employment Contract, based on POEA Memorandum Circular No. 055, series of 1996, is clear:
SECTION 20. COMPENSATION AND BENEFITS
A. COMPENSATION AND BENEFITS FOR DEATH

1. In case of death of the seafarer during the term of his contract, the employer shall pay his beneficiaries the Philippine Currency
equivalent to the amount of Fifty Thousand US dollars (US$50,000) and an additional amount of Seven Thousand US dollars (US$7,000) to each
child under the age of twenty-one (21) but not exceeding four (4) children, at the exchange rate prevailing during the time of payment. (Emphasis
supplied.)
Stated differently, for death of a seafarer to be compensable, the death must occur during the term of his contract of employment. [25] It is the only
condition for compensability of a seafarer’s death. [26] Once it is established that the seaman died during the effectivity of his employment contract,
the employer is liable. [27] In Jerry’s case, the parties did not dispute that Jerry died due to heart ailment during the term of his employment. Aside
from the fact that respondent had submitted Jerry’s death certificate, petitioner admits such fact of death as early as the time it had submitted its first
position paper with the NLRC.
Petitioner, however, alleges that respondent’s claim for death benefits should be denied because there was no reasonable work connection between
Jerry’s death and his illness. To this allegation, we cannot agree. Compensability of Jerry’s death does not depend on whether his illness was work-
connected or not. What is material is that his death occurred during the term of his employment contract. By provision of Section 20(A) of the
POEA Standard Employment Contract, based on POEA Memorandum Circular No. 055, series of 1996, payment of death benefit pension is
mandated in case of death of a seafarer during the term of his employment.
Petitioner further presents an affidavit of waiver [28] allegedly executed by Jerry releasing it from any responsibility and liability and contends that
the Fit-to-Work Certification was issued only upon his insistence to be deployed after he underwent medical examination and was found to have an
unstable blood pressure. Respondent, on the other hand, disputes the validity of such waiver insisting that no waiver can validly renounce the future
rights of Jerry’s heirs and beneficiaries, it being against sound public policy.
Again, we find petitioner’s arguments without merit. It is not necessary, in order to recover compensation benefits, that an employee must have been
in perfect health at the time he contracted the disease. A worker brings with him possible infirmities in the course of his employment, but the
employer, though not an insurer of the health of his employees, takes them as he finds them. [29]
Significantly, in issuing a fit-to-work certification to Jerry, petitioner assumed the risk of liability. Based on the certification itself, petitioner’s
accredited physician had attested that Jerry was fit to work prior to his deployment. The ship’s captain had also reported Jerry to be healthy and
energetic when he joined the crew. [30] Petitioner cannot now evade its liability and deny the compensation for death benefits that respondent
deserves. Thus, we are in agreement with the NLRC decision that:
Respondent cannot escape liability on the mere basis of the affidavit of waiver supposedly executed by the deceased seaman. The basic reason is that
waivers and quitclaims are against public policy and therefore null and void. More especially, We are inclined to regard said document as spurious
or fabricated because it was only brought out on appeal after the Labor Arbiter has awarded death benefits in favor of the complainant and her 4
minor children. [31] (Emphasis supplied and underscoring ours.)
Factual findings of quasi-judicial agencies like the NLRC, when affirmed by the Court of Appeals, are conclusive upon the parties and binding on
this Court. [32] In our view, conclusive reliance can be placed on such findings.
*
*
*
Lastly, respondent’s prayer for the award of attorney’s fees is based on specific provision of the Civil Code. [33] The award of attorney’s fees in this
case is also consistent with current jurisprudence [34] in labor cases. Such award must be upheld, not only because labor cases take much time to
litigate, they also require, based on experience, special dedication and expertise on the part of the pro-worker’s counsel.
WHEREFORE, the petition is hereby DENIED. The Court of Appeals’ Decision dated February 10, 2005 and Resolution dated May 25, 2005 in
CA-G.R. SP No. 85961 are hereby AFFIRMED. Costs against the petitioner.
SO ORDERED.

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FIRST DIVISION

ASSOCIATION OF INTERNATIONAL G.R. No. 157484

PHILIPPINE PORTS AUTHORITY, Promulgated:

Section 23 of the same administrative order states that:

SEC. 6. Corporate Powers and Duties --

a) The corporate duties of the Authority shall be:

b) The corporate powers of the Authority shall be as follows:

SEC. 20. Rates and Charges--

The Court of Appeals disposed of the case as follows:

Hence, this petition.

The Ruling of the Court of Appeals

The Ruling of this Court

The petition has no merit.

On the validity of Section 5.3 of AO 15-95

On the propriety of the issuance

[G.R. No. 154514. July 28, 2005]

ROBLE ARRASTRE, INC., G.R. No. 128509

August 22, 2006

3. [That petitioner procured a] Barangay Clearance.

The Ruling of the RTC

The RTC ratiocinated in this wise, thus:

Finding for petitioner, the court a quo disposed as follows:

Without pronouncement as to costs. The counterclaim of respondent is hereby dismissed. [22]

The Ruling of the Appellate Court

The appellate court pronounced, thus:

Hence, the instant Petition.

Petitioner, in its Memorandum, presented the following statement of issues, to wit:

SKIPPERS UNITED PACIFIC, INC., and J.P. G.R. No. 166363

August 15, 2006

The antecedent facts of the case are as follows:

POSITION : 4th Engineer

BASIC MO. SALARY : US$915.00

BASIC MO. SALARY : US$609.00

BASIC MO. SALARY : US$536.00

BASIC MO. SALARY : US$451.00

(a) For Jerry P. Maguad – US$5,808.00

(b) Porferio L. Ciudadano – US$3,990.00

Hence, this Petition.

I. Whether or not Rule 45 is proper in the instant case.

II. Whether or not the decision of the Court of Appeals is erroneous.

I. the dismissal must be for a just or authorized cause; and,

(b) Gross and habitual neglect by the employee of his duties;

(e) Other causes analogous to the foregoing.

DELSAN TRANSPORT LINES, INC., G.R. No. 149019

PUNO, J., Chairperson,

August 15, 2006

WHEREFORE, judgment is hereby rendered:

A). In Civil Case No. 85-30559:

For lack of merit, the counterclaim is hereby dismissed.

B). In Civil Case No. 85-29357:

For lack of merit, the counterclaim is hereby dismissed.

Costs against the defendant.

We are not persuaded.

1) Flood storm, earthquake, lightning, or other natural disaster or calamity;

Cost against petitioner.

ASSOCIATION OF (DSR) GERMANY AND ARIMURA SANGYO COMPANY,

UNITED HARBOR PILOTS’

REYES, R.T., J.:

RESOLUTION NO. 1541 [8]

RESOLUTION NO. 1554 [9]

SO ORDERED. [12] (Emphasis supplied)

The decision became final and executory on February 14, 2003.

SO ORDERED. [21] (Emphasis supplied)